Risks Still Elevated At These Prices As Jiangsu Boxin Investing&Holdings Co.,Ltd. (SHSE:600083) Shares Dive 37%

Unfortunately for some shareholders, the Jiangsu Boxin Investing&Holdings Co.,Ltd. (SHSE:600083) share price has dived 37% in the last thirty days, prolonging recent pain. The recent drop completes a disastrous twelve months for shareholders, who are sitting on a 71% loss during that time.

Although its price has dipped substantially, you could still be forgiven for thinking Jiangsu Boxin Investing&HoldingsLtd is a stock not worth researching with a price-to-sales ratios (or "P/S") of 2x, considering almost half the companies in China's Trade Distributors industry have P/S ratios below 0.6x. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's as high as it is.

View our latest analysis for Jiangsu Boxin Investing&HoldingsLtd

How Has Jiangsu Boxin Investing&HoldingsLtd Performed Recently?

For example, consider that Jiangsu Boxin Investing&HoldingsLtd's financial performance has been poor lately as its revenue has been in decline. Perhaps the market believes the company can do enough to outperform the rest of the industry in the near future, which is keeping the P/S ratio high. However, if this isn't the case, investors might get caught out paying too much for the stock.

We don't have analyst forecasts, but you can see how recent trends are setting up the company for the future by checking out our free report on Jiangsu Boxin Investing&HoldingsLtd's earnings, revenue and cash flow.

Is There Enough Revenue Growth Forecasted For Jiangsu Boxin Investing&HoldingsLtd?

The only time you'd be truly comfortable seeing a P/S as high as Jiangsu Boxin Investing&HoldingsLtd's is when the company's growth is on track to outshine the industry.

Retrospectively, the last year delivered a frustrating 38% decrease to the company's top line. This means it has also seen a slide in revenue over the longer-term as revenue is down 42% 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 20% shows it's an unpleasant look.

With this in mind, we find it worrying that Jiangsu Boxin Investing&HoldingsLtd's P/S exceeds that of its industry peers. It seems most investors are ignoring the recent poor growth rate and are hoping for a turnaround in the company's business prospects. Only the boldest would assume these prices are sustainable as a continuation of recent revenue trends is likely to weigh heavily on the share price eventually.

The Final Word

Jiangsu Boxin Investing&HoldingsLtd's P/S remain high even after its stock plunged. Using the price-to-sales ratio alone to determine if you should sell your stock isn't sensible, however it can be a practical guide to the company's future prospects.

Our examination of Jiangsu Boxin Investing&HoldingsLtd revealed its shrinking revenue over the medium-term isn't resulting in a P/S as low as we expected, given the industry is set to grow. When we see revenue heading backwards and underperforming the industry forecasts, we feel the possibility of the share price declining is very real, bringing the P/S back into the realm of reasonability. Unless the recent medium-term conditions improve markedly, investors will have a hard time accepting the share price as fair value.

Having said that, be aware Jiangsu Boxin Investing&HoldingsLtd is showing 2 warning signs in our investment analysis, and 1 of those is potentially serious.

If you're unsure about the strength of Jiangsu Boxin Investing&HoldingsLtd'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.

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