Even With A 32% Surge, Cautious Investors Are Not Rewarding Shanghai Xinnanyang Only Education & Technology Co.,Ltd's (SHSE:600661) Performance Completely

Despite an already strong run, Shanghai Xinnanyang Only Education & Technology Co.,Ltd (SHSE:600661) shares have been powering on, with a gain of 32% in the last thirty days. Looking back a bit further, it's encouraging to see the stock is up 59% in the last year.

In spite of the firm bounce in price, Shanghai Xinnanyang Only Education & TechnologyLtd may still be sending buy signals at present with its price-to-sales (or "P/S") ratio of 3.2x, considering almost half of all companies in the Consumer Services industry in China have P/S ratios greater than 4x and even P/S higher than 8x 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 Shanghai Xinnanyang Only Education & TechnologyLtd

What Does Shanghai Xinnanyang Only Education & TechnologyLtd's Recent Performance Look Like?

With its revenue growth in positive territory compared to the declining revenue of most other companies, Shanghai Xinnanyang Only Education & TechnologyLtd has been doing quite well of late. Perhaps the market is expecting future revenue performance to follow the rest of the industry downwards, which has kept the P/S suppressed. If you 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.

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

In order to justify its P/S ratio, Shanghai Xinnanyang Only Education & TechnologyLtd would need to produce sluggish growth that's trailing the industry.

If we review the last year of revenue growth, the company posted a terrific increase of 37%. Still, revenue has fallen 42% in total from three years ago, which is quite disappointing. Therefore, it's fair to say the revenue growth recently has been undesirable for the company.

Shifting to the future, estimates from the lone analyst covering the company suggest revenue should grow by 38% over the next year. With the industry predicted to deliver 35% growth , the company is positioned for a comparable revenue result.

With this in consideration, we find it intriguing that Shanghai Xinnanyang Only Education & TechnologyLtd's P/S is lagging behind its industry peers. It may be that most investors are not convinced the company can achieve future growth expectations.

What Does Shanghai Xinnanyang Only Education & TechnologyLtd's P/S Mean For Investors?

Despite Shanghai Xinnanyang Only Education & TechnologyLtd's share price climbing recently, its P/S still lags most other companies. While the price-to-sales ratio shouldn't be the defining factor in whether you buy a stock or not, it's quite a capable barometer of revenue expectations.

We've seen that Shanghai Xinnanyang Only Education & TechnologyLtd currently trades on a lower than expected P/S since its forecast growth is in line with the wider industry. When we see middle-of-the-road revenue growth like this, we assume it must be the potential risks that are what is placing pressure on the P/S ratio. Perhaps investors are concerned that the company could underperform against the forecasts over the near term.

There are also other vital risk factors to consider before investing and we've discovered 1 warning sign for Shanghai Xinnanyang Only Education & TechnologyLtd that you should be aware of.

If companies with solid past earnings growth is up your alley, you may wish to see this free collection of other companies with strong earnings growth and low P/E ratios.

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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.