Jiangsu Feiliks International Logistics Inc. (SZSE:300240) shareholders won't be pleased to see that the share price has had a very rough month, dropping 31% and undoing the prior period's positive performance. Longer-term shareholders would now have taken a real hit with the stock declining 6.2% in the last year.

Although its price has dipped substantially, when close to half the companies operating in China's Logistics industry have price-to-sales ratios (or "P/S") above 1.1x, you may still consider Jiangsu Feiliks International Logistics as an enticing stock to check out with its 0.3x P/S ratio. However, the P/S might be low for a reason and it requires further investigation to determine if it's justified.

What Does Jiangsu Feiliks International Logistics' P/S Mean For Shareholders?

Jiangsu Feiliks International Logistics has been doing a good job lately as it's been growing revenue at a solid pace. It might be that many expect the respectable revenue performance to degrade substantially, which has repressed the P/S. If that doesn't eventuate, then existing shareholders have reason to be optimistic about the future direction of the share price.

Do Revenue Forecasts Match The Low P/S Ratio?

Jiangsu Feiliks International Logistics' P/S ratio would be typical for a company that's only expected to deliver limited growth, and importantly, perform worse than the industry.

Taking a look back first, we see that the company managed to grow revenues by a handy 12% last year. The solid recent performance means it was also able to grow revenue by 19% in total over the last three years. Accordingly, shareholders would have probably been satisfied with the medium-term rates of revenue growth.

Comparing the recent medium-term revenue trends against the industry's one-year growth forecast of 15% shows it's noticeably less attractive.

With this in consideration, it's easy to understand why Jiangsu Feiliks International Logistics' P/S falls short of the mark set by its industry peers. It seems most investors are expecting to see the recent limited growth rates continue into the future and are only willing to pay a reduced amount for the stock.

The Key Takeaway

Jiangsu Feiliks International Logistics' recently weak share price has pulled its P/S back below other Logistics companies. We'd say the price-to-sales ratio's power isn't primarily as a valuation instrument but rather to gauge current investor sentiment and future expectations.

In line with expectations, Jiangsu Feiliks International Logistics maintains its low P/S on the weakness of its recent three-year growth being lower than the wider industry forecast. Right now shareholders are accepting the low P/S as they concede future revenue probably won't provide any pleasant surprises. Unless the recent medium-term conditions improve, they will continue to form a barrier for the share price around these levels.

And what about other risks? Every company has them, and we've spotted 3 warning signs for Jiangsu Feiliks International Logistics (of which 1 is a bit unpleasant!) you should know about.

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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