Unfortunately for some shareholders, the LingNan Eco&Culture-Tourism Co.,Ltd. (SZSE:002717) share price has dived 45% in the last thirty days, prolonging recent pain. The recent drop completes a disastrous twelve months for shareholders, who are sitting on a 69% loss during that time.

In spite of the heavy fall in price, there still wouldn't be many who think LingNan Eco&Culture-TourismLtd's price-to-sales (or "P/S") ratio of 0.9x is worth a mention when the median P/S in China's Construction industry is similar at about 1x. 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 LingNan Eco&Culture-TourismLtd's Recent Performance Look Like?

For instance, LingNan Eco&Culture-TourismLtd's receding revenue in recent times would have to be some food for thought. Perhaps investors believe the recent revenue performance is enough to keep in line with the industry, which is keeping the P/S from dropping off. If not, then existing shareholders may be a little nervous about the viability of the share price.

Is There Some Revenue Growth Forecasted For LingNan Eco&Culture-TourismLtd?

In order to justify its P/S ratio, LingNan Eco&Culture-TourismLtd would need to produce growth that's similar to the industry.

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 26%. This means it has also seen a slide in revenue over the longer-term as revenue is down 73% in total over the last three years. Therefore, it's fair to say the revenue growth recently has been undesirable for the company.

Weighing that medium-term revenue trajectory against the broader industry's one-year forecast for expansion of 14% shows it's an unpleasant look.

In light of this, it's somewhat alarming that LingNan Eco&Culture-TourismLtd's P/S sits in line with the majority of other companies. Apparently many investors in the company are way less bearish than recent times would indicate and aren't willing to let go of their stock right now. Only the boldest would assume these prices are sustainable as a continuation of recent revenue trends is likely to weigh on the share price eventually.

What Does LingNan Eco&Culture-TourismLtd's P/S Mean For Investors?

With its share price dropping off a cliff, the P/S for LingNan Eco&Culture-TourismLtd looks to be in line with the rest of the Construction industry. While the price-to-sales ratio shouldn't be the defining factor in whether you buy a stock or not, it's quite a capable barometer of revenue expectations.

Our look at LingNan Eco&Culture-TourismLtd 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. When we see revenue heading backwards in the context of growing industry forecasts, it'd make sense to expect a possible share price decline on the horizon, sending the moderate P/S lower. Unless the recent medium-term conditions improve markedly, investors will have a hard time accepting the share price as fair value.

Before you take the next step, you should know about the 3 warning signs for LingNan Eco&Culture-TourismLtd (2 can't be ignored!) that we have uncovered.

If companies with solid past earnings growth is up your alley, you may wish to see this free collection of other companies with strong earnings growth and low P/E ratios.

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