Investors Don't See Light At End Of Jiangsu Hagong Intelligent Robot Co., Ltd's (SZSE:000584) Tunnel And Push Stock Down 25%

To the annoyance of some shareholders, Jiangsu Hagong Intelligent Robot Co., Ltd (SZSE:000584) shares are down a considerable 25% in the last month, which continues a horrid run for the company. The drop over the last 30 days has capped off a tough year for shareholders, with the share price down 32% in that time.

Following the heavy fall in price, Jiangsu Hagong Intelligent Robot may be sending very bullish signals at the moment with its price-to-sales (or "P/S") ratio of 0.7x, since almost half of all companies in the Machinery industry in China have P/S ratios greater than 3.3x and even P/S higher than 6x are not unusual. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the highly reduced P/S.

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What Does Jiangsu Hagong Intelligent Robot's P/S Mean For Shareholders?

As an illustration, revenue has deteriorated at Jiangsu Hagong Intelligent Robot 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. However, if this doesn't eventuate then existing shareholders may be feeling optimistic about the future direction of the share price.

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Is There Any Revenue Growth Forecasted For Jiangsu Hagong Intelligent Robot?

There's an inherent assumption that a company should far underperform the industry for P/S ratios like Jiangsu Hagong Intelligent Robot's to be considered reasonable.

Retrospectively, the last year delivered a frustrating 7.4% decrease to the company's top line. Regardless, revenue has managed to lift by a handy 28% in aggregate from three years ago, thanks to the earlier period of growth. Accordingly, while they would have preferred to keep the run going, shareholders would be roughly satisfied with the medium-term rates of revenue growth.

This is in contrast to the rest of the industry, which is expected to grow by 23% over the next year, materially higher than the company's recent medium-term annualised growth rates.

With this in consideration, it's easy to understand why Jiangsu Hagong Intelligent Robot's P/S falls short of the mark set by its industry peers. It seems most investors are expecting to see the recent limited growth rates continue into the future and are only willing to pay a reduced amount for the stock.

What Does Jiangsu Hagong Intelligent Robot's P/S Mean For Investors?

Jiangsu Hagong Intelligent Robot's P/S looks about as weak as its stock price lately. Typically, we'd caution against reading too much into price-to-sales ratios when settling on investment decisions, though it can reveal plenty about what other market participants think about the company.

In line with expectations, Jiangsu Hagong Intelligent Robot maintains its low P/S on the weakness of its recent three-year growth being lower than the wider industry forecast. Right now shareholders are accepting the low P/S as they concede future revenue probably won't provide any pleasant surprises. If recent medium-term revenue trends continue, it's hard to see the share price experience a reversal of fortunes anytime soon.

Before you settle on your opinion, we've discovered 2 warning signs for Jiangsu Hagong Intelligent Robot (1 can't be ignored!) that you should be aware of.

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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.