The Shenzhen Fine Made Electronics Group Co., Ltd. (SZSE:300671) share price has fared very poorly over the last month, falling by a substantial 29%. The recent drop completes a disastrous twelve months for shareholders, who are sitting on a 58% loss during that time.

In spite of the heavy fall in price, you could still be forgiven for feeling indifferent about Shenzhen Fine Made Electronics Group's P/S ratio of 6.3x, since the median price-to-sales (or "P/S") ratio for the Semiconductor industry in China is also close to 5.8x. Although, it's not wise to simply ignore the P/S without explanation as investors may be disregarding a distinct opportunity or a costly mistake.

What Does Shenzhen Fine Made Electronics Group's Recent Performance Look Like?

For instance, Shenzhen Fine Made Electronics Group's receding revenue in recent times would have to be some food for thought. It might be that many expect the company to put the disappointing revenue performance behind them over the coming period, which has kept the P/S from falling. If you like the company, you'd at least be hoping this is the case so that you could potentially pick up some stock while it's not quite in favour.

Is There Some Revenue Growth Forecasted For Shenzhen Fine Made Electronics Group?

The only time you'd be comfortable seeing a P/S like Shenzhen Fine Made Electronics Group's is when the company's growth is tracking the industry closely.

Taking a look back first, the company's revenue growth last year wasn't something to get excited about as it posted a disappointing decline of 13%. This has erased any of its gains during the last three years, with practically no change in revenue being achieved in total. So it appears to us that the company has had a mixed result in terms of growing revenue over that time.

Weighing that medium-term revenue trajectory against the broader industry's one-year forecast for expansion of 34% shows it's an unpleasant look.

In light of this, it's somewhat alarming that Shenzhen Fine Made Electronics Group's P/S sits in line with the majority of other companies. It seems most investors are ignoring the recent poor growth rate and are hoping for a turnaround in the company's business prospects. There's a good chance existing shareholders are setting themselves up for future disappointment if the P/S falls to levels more in line with the recent negative growth rates.

The Key Takeaway

With its share price dropping off a cliff, the P/S for Shenzhen Fine Made Electronics Group looks to be in line with the rest of the Semiconductor industry. It's argued the price-to-sales ratio is an inferior measure of value within certain industries, but it can be a powerful business sentiment indicator.

Our look at Shenzhen Fine Made Electronics Group revealed its shrinking revenues over the medium-term haven't impacted the P/S as much as we anticipated, given the industry is set to grow. Even though it matches the industry, we're uncomfortable with the current P/S ratio, as this dismal revenue performance is unlikely to support a more positive sentiment for long. Unless the the circumstances surrounding the recent medium-term improve, it wouldn't be wrong to expect a a difficult period ahead for the company's shareholders.

Before you take the next step, you should know about the 2 warning signs for Shenzhen Fine Made Electronics Group (1 shouldn't be ignored!) that we have uncovered.

If you're unsure about the strength of Shenzhen Fine Made Electronics Group's business, why not explore our interactive list of stocks with solid business fundamentals for some other companies you may have missed.

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