Benign Growth For Guangdong Lyric Robot Automation Co.,Ltd. (SHSE:688499) Underpins Stock's 25% Plummet

The Guangdong Lyric Robot Automation Co.,Ltd. (SHSE:688499) share price has fared very poorly over the last month, falling by a substantial 25%. Instead of being rewarded, shareholders who have already held through the last twelve months are now sitting on a 41% share price drop.

Following the heavy fall in price, Guangdong Lyric Robot AutomationLtd's price-to-sales (or "P/S") ratio of 1x might make it look like a buy right now compared to the Machinery industry in China, where around half of the companies have P/S ratios above 2.8x and even P/S above 5x are quite common. However, the P/S might be low for a reason and it requires further investigation to determine if it's justified.

Check out our latest analysis for Guangdong Lyric Robot AutomationLtd

How Guangdong Lyric Robot AutomationLtd Has Been Performing

Guangdong Lyric Robot AutomationLtd 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. It seems that many are expecting the poor revenue performance to persist, which has repressed the P/S ratio. So while you could say the stock is cheap, investors will be looking for improvement before they see it as good value.

Keen to find out how analysts think Guangdong Lyric Robot AutomationLtd's future stacks up against the industry? In that case, our free report is a great place to start.

What Are Revenue Growth Metrics Telling Us About The Low P/S?

In order to justify its P/S ratio, Guangdong Lyric Robot AutomationLtd would need to produce sluggish growth that's trailing the industry.

Retrospectively, the last year delivered a frustrating 44% decrease to the company's top line. However, a few very strong years before that means that it was still able to grow revenue by an impressive 45% in total over the last three years. Accordingly, while they would have preferred to keep the run going, shareholders would definitely welcome the medium-term rates of revenue growth.

Looking ahead now, revenue is anticipated to climb by 8.2% during the coming year according to the sole analyst following the company. That's shaping up to be materially lower than the 22% growth forecast for the broader industry.

With this information, we can see why Guangdong Lyric Robot AutomationLtd is trading at a P/S lower than the industry. It seems most investors are expecting to see limited future growth and are only willing to pay a reduced amount for the stock.

The Bottom Line On Guangdong Lyric Robot AutomationLtd's P/S

Guangdong Lyric Robot AutomationLtd's P/S has taken a dip along with its share price. 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.

We've established that Guangdong Lyric Robot AutomationLtd maintains its low P/S on the weakness of its forecast growth being lower than the wider industry, as expected. Shareholders' pessimism on the revenue prospects for the company seems to be the main contributor to the depressed P/S. The company will need a change of fortune to justify the P/S rising higher in the future.

We don't want to rain on the parade too much, but we did also find 3 warning signs for Guangdong Lyric Robot AutomationLtd (2 are a bit unpleasant!) that you need to be mindful of.

If strong companies turning a profit tickle your fancy, then you'll want to check out this free list of interesting companies that trade on a low P/E (but have proven they can grow earnings).

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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.