Suzhou Kelida Building& Decoration Co.,Ltd. (SHSE:603828) Not Doing Enough For Some Investors As Its Shares Slump 25%

The Suzhou Kelida Building& Decoration Co.,Ltd. (SHSE:603828) share price has fared very poorly over the last month, falling by a substantial 25%. The drop over the last 30 days has capped off a tough year for shareholders, with the share price down 25% in that time.

After such a large drop in price, when close to half the companies operating in China's Building industry have price-to-sales ratios (or "P/S") above 1.7x, you may consider Suzhou Kelida Building& DecorationLtd as an enticing stock to check out with its 0.7x P/S ratio. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the reduced P/S.

View our latest analysis for Suzhou Kelida Building& DecorationLtd

What Does Suzhou Kelida Building& DecorationLtd's Recent Performance Look Like?

For example, consider that Suzhou Kelida Building& DecorationLtd's financial performance has been poor lately as its revenue has been in decline. One possibility is that the P/S is low because investors think the company won't do enough to avoid underperforming the broader industry in the near future. However, if this doesn't eventuate then existing shareholders may be feeling optimistic about the future direction of the share price.

Although there are no analyst estimates available for Suzhou Kelida Building& DecorationLtd, take a look at this free data-rich visualisation to see how the company stacks up on earnings, revenue and cash flow.

How Is Suzhou Kelida Building& DecorationLtd's Revenue Growth Trending?

The only time you'd be truly comfortable seeing a P/S as low as Suzhou Kelida Building& DecorationLtd's is when the company's growth is on track to lag the industry.

In reviewing the last year of financials, we were disheartened to see the company's revenues fell to the tune of 9.1%. The last three years don't look nice either as the company has shrunk revenue by 19% in aggregate. Therefore, it's fair to say the revenue growth recently has been undesirable for the company.

In contrast to the company, the rest of the industry is expected to grow by 24% over the next year, which really puts the company's recent medium-term revenue decline into perspective.

With this information, we are not surprised that Suzhou Kelida Building& DecorationLtd is trading at a P/S lower than the industry. 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.

The Key Takeaway

Suzhou Kelida Building& DecorationLtd's P/S has taken a dip along with its share price. 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.

It's no surprise that Suzhou Kelida Building& DecorationLtd maintains its low P/S off the back of its sliding revenue over the medium-term. At this stage investors feel the potential for an improvement in revenue isn't great enough to justify a higher P/S ratio. Given the current circumstances, it seems unlikely that the share price will experience any significant movement in either direction in the near future if recent medium-term revenue trends persist.

Before you take the next step, you should know about the 2 warning signs for Suzhou Kelida Building& DecorationLtd (1 doesn't sit too well with us!) that we have uncovered.

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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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.