Revenues Working Against Guizhou Transportation Planning Survey&Design Academe Co.,Ltd.'s (SHSE:603458) Share Price Following 30% Dive

Guizhou Transportation Planning Survey&Design Academe Co.,Ltd. (SHSE:603458) shareholders that were waiting for something to happen have been dealt a blow with a 30% share price drop in the last month. For any long-term shareholders, the last month ends a year to forget by locking in a 56% share price decline.

Following the heavy fall in price, Guizhou Transportation Planning Survey&Design AcademeLtd may look like a strong buying opportunity at present with its price-to-sales (or "P/S") ratio of 0.7x, considering almost half of all companies in the Professional Services industry in China have P/S ratios greater than 2.8x and even P/S higher than 8x aren't out of the ordinary. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the highly reduced P/S.

View our latest analysis for Guizhou Transportation Planning Survey&Design AcademeLtd

How Guizhou Transportation Planning Survey&Design AcademeLtd Has Been Performing

For instance, Guizhou Transportation Planning Survey&Design AcademeLtd's receding revenue in recent times would have to be some food for thought. It might be that many expect the disappointing revenue performance to continue or accelerate, which has repressed the P/S. However, if this doesn't eventuate then existing shareholders may be feeling optimistic about the future direction of the share price.

We don't have analyst forecasts, but you can see how recent trends are setting up the company for the future by checking out our free report on Guizhou Transportation Planning Survey&Design AcademeLtd's earnings, revenue and cash flow.

How Is Guizhou Transportation Planning Survey&Design AcademeLtd's Revenue Growth Trending?

Guizhou Transportation Planning Survey&Design AcademeLtd's P/S ratio would be typical for a company that's expected to deliver very poor growth or even falling revenue, and importantly, perform much worse than the industry.

Taking a look back first, the company's revenue growth last year wasn't something to get excited about as it posted a disappointing decline of 8.2%. As a result, revenue from three years ago have also fallen 37% overall. So unfortunately, we have to acknowledge that the company has not done a great job of growing revenue over that time.

Weighing that medium-term revenue trajectory against the broader industry's one-year forecast for expansion of 47% shows it's an unpleasant look.

With this information, we are not surprised that Guizhou Transportation Planning Survey&Design AcademeLtd 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. Even just maintaining these prices could be difficult to achieve as recent revenue trends are already weighing down the shares.

The Key Takeaway

Shares in Guizhou Transportation Planning Survey&Design AcademeLtd have plummeted and its P/S has followed suit. 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.

Our examination of Guizhou Transportation Planning Survey&Design AcademeLtd confirms that the company's shrinking revenue over the past medium-term is a key factor in its low price-to-sales ratio, given the industry is projected to grow. Right now shareholders are accepting the low P/S as they concede future revenue probably won't provide any pleasant surprises either. Unless the recent medium-term conditions improve, they will continue to form a barrier for the share price around these levels.

You need to take note of risks, for example - Guizhou Transportation Planning Survey&Design AcademeLtd has 2 warning signs (and 1 which shouldn't be ignored) we think 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.