Ningbo Fangzheng Automobile Mould Co.,Ltd.'s (SZSE:300998) 27% Dip Still Leaving Some Shareholders Feeling Restless Over Its P/SRatio

The Ningbo Fangzheng Automobile Mould Co.,Ltd. (SZSE:300998) share price has fared very poorly over the last month, falling by a substantial 27%. The drop over the last 30 days has capped off a tough year for shareholders, with the share price down 45% in that time.

Even after such a large drop in price, you could still be forgiven for feeling indifferent about Ningbo Fangzheng Automobile MouldLtd's P/S ratio of 2.4x, since the median price-to-sales (or "P/S") ratio for the Auto Components industry in China is also close to 2x. However, investors might be overlooking a clear opportunity or potential setback if there is no rational basis for the P/S.

Check out our latest analysis for Ningbo Fangzheng Automobile MouldLtd

What Does Ningbo Fangzheng Automobile MouldLtd's Recent Performance Look Like?

Ningbo Fangzheng Automobile MouldLtd has been doing a good job lately as it's been growing revenue at a solid pace. Perhaps the market is expecting future revenue performance to only keep up with the broader industry, which has keeping the P/S in line with expectations. If that doesn't eventuate, then existing shareholders probably aren't too pessimistic about the future direction of the share price.

Want the full picture on earnings, revenue and cash flow for the company? Then our free report on Ningbo Fangzheng Automobile MouldLtd will help you shine a light on its historical performance.

How Is Ningbo Fangzheng Automobile MouldLtd's Revenue Growth Trending?

The only time you'd be comfortable seeing a P/S like Ningbo Fangzheng Automobile MouldLtd's is when the company's growth is tracking the industry closely.

Taking a look back first, we see that the company managed to grow revenues by a handy 13% last year. This was backed up an excellent period prior to see revenue up by 45% in total over the last three years. Therefore, it's fair to say the revenue growth recently has been superb for the company.

Comparing that to the industry, which is predicted to deliver 25% growth in the next 12 months, the company's momentum is weaker, based on recent medium-term annualised revenue results.

With this information, we find it interesting that Ningbo Fangzheng Automobile MouldLtd is trading at a fairly similar P/S compared to the industry. It seems most investors are ignoring the fairly limited recent growth rates and are willing to pay up for exposure to the stock. Maintaining these prices will be difficult to achieve as a continuation of recent revenue trends is likely to weigh down the shares eventually.

The Bottom Line On Ningbo Fangzheng Automobile MouldLtd's P/S

With its share price dropping off a cliff, the P/S for Ningbo Fangzheng Automobile MouldLtd looks to be in line with the rest of the Auto Components industry. 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.

We've established that Ningbo Fangzheng Automobile MouldLtd's average P/S is a bit surprising since its recent three-year growth is lower than the wider industry forecast. When we see weak revenue with slower than industry growth, we suspect the share price is at risk of declining, bringing the P/S back in line with expectations. If recent medium-term revenue trends continue, the probability of a share price decline will become quite substantial, placing shareholders at risk.

There are also other vital risk factors to consider before investing and we've discovered 1 warning sign for Ningbo Fangzheng Automobile MouldLtd that you should be aware of.

If you're unsure about the strength of Ningbo Fangzheng Automobile MouldLtd'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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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.

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