Jiajiayue Group Co., Ltd.'s (SHSE:603708) Price Is Right But Growth Is Lacking

When close to half the companies operating in the Consumer Retailing industry in China have price-to-sales ratios (or "P/S") above 0.9x, you may consider Jiajiayue Group Co., Ltd. (SHSE:603708) as an attractive investment with its 0.4x P/S ratio. However, the P/S might be low for a reason and it requires further investigation to determine if it's justified.

See our latest analysis for Jiajiayue Group

How Has Jiajiayue Group Performed Recently?

While the industry has experienced revenue growth lately, Jiajiayue Group's revenue has gone into reverse gear, which is not great. The P/S ratio is probably low because investors think this poor revenue performance isn't going to get any better. If you still like the company, you'd be hoping this isn't the case so that you could potentially pick up some stock while it's out of favour.

Keen to find out how analysts think Jiajiayue Group's future stacks up against the industry? In that case, our free report is a great place to start.

How Is Jiajiayue Group's Revenue Growth Trending?

There's an inherent assumption that a company should underperform the industry for P/S ratios like Jiajiayue Group's to be considered reasonable.

If we review the last year of revenue, the company posted a result that saw barely any deviation from a year ago. Fortunately, a few good years before that means that it was still able to grow revenue by 7.9% in total over the last three years. Accordingly, shareholders probably wouldn't have been overly satisfied with the unstable medium-term growth rates.

Looking ahead now, revenue is anticipated to climb by 6.3% each year during the coming three years according to the nine analysts following the company. With the industry predicted to deliver 10% growth per year, the company is positioned for a weaker revenue result.

With this information, we can see why Jiajiayue Group is trading at a P/S lower than the industry. Apparently many shareholders weren't comfortable holding on while the company is potentially eyeing a less prosperous future.

The Final Word

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.

We've established that Jiajiayue Group maintains its low P/S on the weakness of its forecast growth being lower than the wider industry, as expected. Right now shareholders are accepting the low P/S as they concede future revenue probably won't provide any pleasant surprises. It's hard to see the share price rising strongly in the near future under these circumstances.

You always need to take note of risks, for example - Jiajiayue Group has 2 warning signs we think you should be aware of.

If these risks are making you reconsider your opinion on Jiajiayue Group, 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.