Why Investors Shouldn't Be Surprised By Beijing Shengtong Printing Co., Ltd's (SZSE:002599) Low P/S

You may think that with a price-to-sales (or "P/S") ratio of 1.2x Beijing Shengtong Printing Co., Ltd (SZSE:002599) is a stock worth checking out, seeing as almost half of all the Commercial Services companies in China have P/S ratios greater than 2.5x and even P/S higher than 5x aren't out of the ordinary. 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 Beijing Shengtong Printing

What Does Beijing Shengtong Printing's P/S Mean For Shareholders?

Beijing Shengtong Printing could be doing better as it's been growing revenue less than most other companies lately. Perhaps the market is expecting the current trend of poor revenue growth to continue, which has kept the P/S suppressed. If this is the case, then existing shareholders will probably struggle to get excited about the future direction of the share price.

If you'd like to see what analysts are forecasting going forward, you should check out our free report on Beijing Shengtong Printing.

Is There Any Revenue Growth Forecasted For Beijing Shengtong Printing?

The only time you'd be truly comfortable seeing a P/S as low as Beijing Shengtong Printing's is when the company's growth is on track to lag the industry.

Taking a look back first, we see that the company managed to grow revenues by a handy 3.5% last year. The solid recent performance means it was also able to grow revenue by 17% in total over the last three years. So we can start by confirming that the company has actually done a good job of growing revenue over that time.

Shifting to the future, estimates from the lone analyst covering the company suggest revenue should grow by 17% over the next year. With the industry predicted to deliver 29% growth, the company is positioned for a weaker revenue result.

With this in consideration, its clear as to why Beijing Shengtong Printing's P/S is falling short industry peers. 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 Beijing Shengtong Printing's P/S

Generally, our preference is to limit the use of the price-to-sales ratio to establishing what the market thinks about the overall health of a company.

We've established that Beijing Shengtong Printing 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. It's hard to see the share price rising strongly in the near future under these circumstances.

The company's balance sheet is another key area for risk analysis. You can assess many of the main risks through our free balance sheet analysis for Beijing Shengtong Printing with six simple checks.

If these risks are making you reconsider your opinion on Beijing Shengtong Printing, explore our interactive list of high quality stocks to get an idea of what else is out there.

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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.