To the annoyance of some shareholders, U-BX Technology Ltd. (NASDAQ:UBXG) shares are down a considerable 38% in the last month, which continues a horrid run for the company. To make matters worse, the recent drop has wiped out a year's worth of gains with the share price now back where it started a year ago.

Following the heavy fall in price, U-BX Technology may be sending very bullish signals at the moment with its price-to-sales (or "P/S") ratio of 0.2x, since almost half of all companies in the IT industry in the United States have P/S ratios greater than 2.3x and even P/S higher than 6x are not unusual. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's so limited.

How Has U-BX Technology Performed Recently?

For example, consider that U-BX Technology's financial performance has been poor lately as its revenue has been in decline. It might be that many expect the disappointing revenue performance to continue or accelerate, which has repressed the P/S. If you 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.

How Is U-BX Technology's Revenue Growth Trending?

In order to justify its P/S ratio, U-BX Technology would need to produce anemic growth that's substantially trailing the industry.

Retrospectively, the last year delivered a frustrating 45% decrease to the company's top line. As a result, revenue from three years ago have also fallen 29% overall. Accordingly, shareholders would have felt downbeat about the medium-term rates of revenue growth.

Weighing that medium-term revenue trajectory against the broader industry's one-year forecast for expansion of 11% shows it's an unpleasant look.

With this in mind, we understand why U-BX Technology's P/S is lower than most of its industry peers. Nonetheless, there's no guarantee the P/S has reached a floor yet with revenue going in reverse. There's potential for the P/S to fall to even lower levels if the company doesn't improve its top-line growth.

What Does U-BX Technology's P/S Mean For Investors?

Shares in U-BX Technology have plummeted and its P/S has followed suit. Generally, our preference is to limit the use of the price-to-sales ratio to establishing what the market thinks about the overall health of a company.

It's no surprise that U-BX Technology maintains its low P/S off the back of its sliding revenue over the medium-term. Right now shareholders are accepting the low P/S as they concede future revenue probably won't provide any pleasant surprises either. Unless the recent medium-term conditions improve, they will continue to form a barrier for the share price around these levels.

Plus, you should also learn about these 3 warning signs we've spotted with U-BX Technology.

If these risks are making you reconsider your opinion on U-BX Technology, explore our interactive list of high quality stocks to get an idea of what else is out there.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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.