The Market Doesn't Like What It Sees From Jin Tong Ling Technology Group Co., Ltd.'s (SZSE:300091) Revenues Yet As Shares Tumble 26%

To the annoyance of some shareholders, Jin Tong Ling Technology Group Co., Ltd. (SZSE:300091) shares are down a considerable 26% in the last month, which continues a horrid run for the company. Instead of being rewarded, shareholders who have already held through the last twelve months are now sitting on a 50% share price drop.

After such a large drop in price, Jin Tong Ling Technology Group may be sending bullish signals at the moment with its price-to-sales (or "P/S") ratio of 1.4x, since almost half of all companies in the Machinery industry in China have P/S ratios greater than 2.6x and even P/S higher than 5x are not unusual. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's limited.

Check out our latest analysis for Jin Tong Ling Technology Group

How Jin Tong Ling Technology Group Has Been Performing

For example, consider that Jin Tong Ling Technology Group's financial performance has been pretty ordinary lately as revenue growth is non-existent. It might be that many expect the uninspiring revenue performance to worsen, which has repressed the P/S. If not, then existing shareholders may be feeling optimistic about the future direction of the share price.

Want the full picture on earnings, revenue and cash flow for the company? Then our free report on Jin Tong Ling Technology Group will help you shine a light on its historical performance.

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

In order to justify its P/S ratio, Jin Tong Ling Technology Group would need to produce sluggish growth that's trailing the industry.

Taking a look back first, we see that there was hardly any revenue growth to speak of for the company over the past year. Whilst it's an improvement, it wasn't enough to get the company out of the hole it was in, with revenue down 1.6% overall from three years ago. Accordingly, shareholders would have felt downbeat about the medium-term rates of revenue growth.

Comparing that to the industry, which is predicted to deliver 24% growth in the next 12 months, the company's downward momentum based on recent medium-term revenue results is a sobering picture.

With this in mind, we understand why Jin Tong Ling Technology Group's P/S is lower than most of its industry peers. However, we think shrinking revenues are unlikely to lead to a stable P/S over the longer term, which could set up shareholders for future disappointment. Even just maintaining these prices could be difficult to achieve as recent revenue trends are already weighing down the shares.

The Bottom Line On Jin Tong Ling Technology Group's P/S

The southerly movements of Jin Tong Ling Technology Group's shares means its P/S is now sitting at a pretty low level. 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.

As we suspected, our examination of Jin Tong Ling Technology Group revealed its shrinking revenue over the medium-term is contributing to its low P/S, given the industry is set to grow. Right now shareholders are accepting the low P/S as they concede future revenue probably won't provide any pleasant surprises either. 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.

And what about other risks? Every company has them, and we've spotted 2 warning signs for Jin Tong Ling Technology Group you should know about.

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.