NSFOCUS Technologies Group Co., Ltd. (SZSE:300369) shareholders would be excited to see that the share price has had a great month, posting a 26% gain and recovering from prior weakness. Unfortunately, the gains of the last month did little to right the losses of the last year with the stock still down 38% over that time.

In spite of the firm bounce in price, NSFOCUS Technologies Group may still be sending buy signals at present with its price-to-sales (or "P/S") ratio of 2.7x, considering almost half of all companies in the Software industry in China have P/S ratios greater than 4.7x and even P/S higher than 8x aren't out of the ordinary. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's limited.

What Does NSFOCUS Technologies Group's P/S Mean For Shareholders?

NSFOCUS Technologies Group hasn't been tracking well recently as its declining revenue compares poorly to other companies, which have seen some growth in their revenues on average. Perhaps the P/S remains low as investors think the prospects of strong revenue growth aren't on the horizon. If you still like the company, you'd be hoping this isn't the case so that you could potentially pick up some stock while it's out of favour.

Is There Any Revenue Growth Forecasted For NSFOCUS Technologies Group?

In order to justify its P/S ratio, NSFOCUS Technologies Group would need to produce sluggish growth that's trailing 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 29%. The last three years don't look nice either as the company has shrunk revenue by 21% in aggregate. So unfortunately, we have to acknowledge that the company has not done a great job of growing revenue over that time.

Turning to the outlook, the next year should generate growth of 27% as estimated by the dual analysts watching the company. With the industry predicted to deliver 26% growth , the company is positioned for a comparable revenue result.

With this in consideration, we find it intriguing that NSFOCUS Technologies Group's P/S is lagging behind its industry peers. It may be that most investors are not convinced the company can achieve future growth expectations.

What Does NSFOCUS Technologies Group's P/S Mean For Investors?

The latest share price surge wasn't enough to lift NSFOCUS Technologies Group's P/S close to the industry median. 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.

It looks to us like the P/S figures for NSFOCUS Technologies Group remain low despite growth that is expected to be in line with other companies in the industry. Despite average revenue growth estimates, there could be some unobserved threats keeping the P/S low. Perhaps investors are concerned that the company could underperform against the forecasts over the near term.

There are also other vital risk factors to consider before investing and we've discovered 1 warning sign for NSFOCUS Technologies Group that you should be aware of.

It's important to make sure you look for a great company, not just the first idea you come across. So if growing profitability aligns with your idea of a great company, take a peek at this free list of interesting companies with strong recent earnings growth (and a low P/E).

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.