Revenues Working Against Guangzhou Shangpin Home Collection Co., Ltd.'s (SZSE:300616) Share Price Following 27% Dive

Guangzhou Shangpin Home Collection Co., Ltd. (SZSE:300616) shares have had a horrible month, losing 27% after a relatively good period beforehand. The drop over the last 30 days has capped off a tough year for shareholders, with the share price down 37% in that time.

After such a large drop in price, Guangzhou Shangpin Home Collection may be sending bullish signals at the moment with its price-to-sales (or "P/S") ratio of 0.6x, since almost half of all companies in the Consumer Durables industry in China have P/S ratios greater than 2x and even P/S higher than 5x are not unusual. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the reduced P/S.

Check out our latest analysis for Guangzhou Shangpin Home Collection

What Does Guangzhou Shangpin Home Collection's Recent Performance Look Like?

Guangzhou Shangpin Home Collection could be doing better as its revenue has been going backwards lately while most other companies have been seeing positive revenue growth. It seems that many are expecting the poor revenue performance to persist, which has repressed the P/S ratio. So while you could say the stock is cheap, investors will be looking for improvement before they see it as good value.

If you'd like to see what analysts are forecasting going forward, you should check out our free report on Guangzhou Shangpin Home Collection.

Is There Any Revenue Growth Forecasted For Guangzhou Shangpin Home Collection?

Guangzhou Shangpin Home Collection's P/S ratio would be typical for a company that's only expected to deliver limited growth, and importantly, perform 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 19%. The last three years don't look nice either as the company has shrunk revenue by 44% in aggregate. Therefore, it's fair to say the revenue growth recently has been undesirable for the company.

Looking ahead now, revenue is anticipated to climb by 6.2% during the coming year according to the five analysts following the company. Meanwhile, the rest of the industry is forecast to expand by 11%, which is noticeably more attractive.

In light of this, it's understandable that Guangzhou Shangpin Home Collection's P/S sits below the majority of other companies. It seems most investors are expecting to see limited future growth and are only willing to pay a reduced amount for the stock.

What We Can Learn From Guangzhou Shangpin Home Collection's P/S?

Guangzhou Shangpin Home Collection's P/S has taken a dip along with its share price. It's argued the price-to-sales ratio is an inferior measure of value within certain industries, but it can be a powerful business sentiment indicator.

As we suspected, our examination of Guangzhou Shangpin Home Collection's analyst forecasts revealed that its inferior revenue outlook is contributing to its low P/S. At this stage investors feel the potential for an improvement in revenue isn't great enough to justify a higher P/S ratio. Unless these conditions improve, they will continue to form a barrier for the share price around these levels.

You should always think about risks. Case in point, we've spotted 2 warning signs for Guangzhou Shangpin Home Collection you should be aware of.

If you're unsure about the strength of Guangzhou Shangpin Home Collection's business, why not explore our interactive list of stocks with solid business fundamentals for some other companies you may have missed.

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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.