It's Down 26% But Guangdong Lyric Robot Automation Co.,Ltd. (SHSE:688499) Could Be Riskier Than It Looks

The Guangdong Lyric Robot Automation Co.,Ltd. (SHSE:688499) share price has fared very poorly over the last month, falling by a substantial 26%. For any long-term shareholders, the last month ends a year to forget by locking in a 69% share price decline.

Since its price has dipped substantially, Guangdong Lyric Robot AutomationLtd's price-to-sales (or "P/S") ratio of 0.5x 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 2.5x and even P/S above 5x are quite common. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's limited.

View our latest analysis for Guangdong Lyric Robot AutomationLtd

What Does Guangdong Lyric Robot AutomationLtd's P/S Mean For Shareholders?

As an illustration, revenue has deteriorated at Guangdong Lyric Robot AutomationLtd over the last year, which is not ideal at all. Perhaps the market believes the recent revenue performance isn't good enough to keep up the industry, causing the P/S ratio to suffer. Those who are bullish on Guangdong Lyric Robot AutomationLtd will be hoping that this isn't the case so that they can pick up the stock at a lower valuation.

Although there are no analyst estimates available for Guangdong Lyric Robot AutomationLtd, take a look at this free data-rich visualisation to see how the company stacks up on earnings, revenue and cash flow.

Do Revenue Forecasts Match The Low P/S Ratio?

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 3.8% decrease to the company's top line. Even so, admirably revenue has lifted 152% in aggregate from three years ago, notwithstanding the last 12 months. Although it's been a bumpy ride, it's still fair to say the revenue growth recently has been more than adequate for the company.

Comparing that recent medium-term revenue trajectory with the industry's one-year growth forecast of 23% shows it's noticeably more attractive.

With this in mind, we find it intriguing that Guangdong Lyric Robot AutomationLtd's P/S isn't as high compared to that of its industry peers. It looks like most investors are not convinced the company can maintain its recent growth rates.

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. While the price-to-sales ratio shouldn't be the defining factor in whether you buy a stock or not, it's quite a capable barometer of revenue expectations.

Our examination of Guangdong Lyric Robot AutomationLtd revealed its three-year revenue trends aren't boosting its P/S anywhere near as much as we would have predicted, given they look better than current industry expectations. When we see robust revenue growth that outpaces the industry, we presume that there are notable underlying risks to the company's future performance, which is exerting downward pressure on the P/S ratio. It appears many are indeed anticipating revenue instability, because the persistence of these recent medium-term conditions would normally provide a boost to the share price.

You always need to take note of risks, for example - Guangdong Lyric Robot AutomationLtd has 3 warning signs we think you should be aware of.

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.

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.

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