Revenues Not Telling The Story For Shanghai Xinnanyang Only Education & Technology Co.,Ltd (SHSE:600661) After Shares Rise 33%

The Shanghai Xinnanyang Only Education & Technology Co.,Ltd (SHSE:600661) share price has done very well over the last month, posting an excellent gain of 33%. Looking further back, the 15% rise over the last twelve months isn't too bad notwithstanding the strength over the last 30 days.

Even after such a large jump in price, it's still not a stretch to say that Shanghai Xinnanyang Only Education & TechnologyLtd's price-to-sales (or "P/S") ratio of 3.4x right now seems quite "middle-of-the-road" compared to the Consumer Services industry in China, where the median P/S ratio is around 3.5x. Although, it's not wise to simply ignore the P/S without explanation as investors may be disregarding a distinct opportunity or a costly mistake.

Check out our latest analysis for Shanghai Xinnanyang Only Education & TechnologyLtd

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

Revenue has risen firmly for Shanghai Xinnanyang Only Education & TechnologyLtd recently, which is pleasing to see. It might be that many expect the respectable revenue performance to wane, which has kept the P/S from rising. Those who are bullish on Shanghai Xinnanyang Only Education & TechnologyLtd will be hoping that this isn't the case, so that they can pick up the stock at a lower valuation.

Although there are no analyst estimates available for Shanghai Xinnanyang Only Education & TechnologyLtd, take a look at this free data-rich visualisation to see how the company stacks up on earnings, revenue and cash flow.

Is There Some Revenue Growth Forecasted For Shanghai Xinnanyang Only Education & TechnologyLtd?

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

If we review the last year of revenue growth, the company posted a terrific increase of 16%. Despite this strong recent growth, it's still struggling to catch up as its three-year revenue frustratingly shrank by 52% overall. So unfortunately, we have to acknowledge that the company has not done a great job of growing revenues over that time.

Comparing that to the industry, which is predicted to deliver 28% growth in the next 12 months, the company's downward momentum based on recent medium-term revenue results is a sobering picture.

In light of this, it's somewhat alarming that Shanghai Xinnanyang Only Education & TechnologyLtd's P/S sits in line with the majority of other companies. It seems most investors are ignoring the recent poor growth rate and are hoping for a turnaround in the company's business prospects. There's a good chance existing shareholders are setting themselves up for future disappointment if the P/S falls to levels more in line with the recent negative growth rates.

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

Its shares have lifted substantially and now Shanghai Xinnanyang Only Education & TechnologyLtd's P/S is back within range of the industry median. 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 find it unexpected that Shanghai Xinnanyang Only Education & TechnologyLtd trades at a P/S ratio that is comparable to the rest of the industry, despite experiencing declining revenues during the medium-term, while the industry as a whole is expected to grow. Even though it matches the industry, we're uncomfortable with the current P/S ratio, as this dismal revenue performance is unlikely to support a more positive sentiment for long. Unless the recent medium-term conditions improve markedly, investors will have a hard time accepting the share price as fair value.

Having said that, be aware Shanghai Xinnanyang Only Education & TechnologyLtd is showing 1 warning sign in our investment analysis, you should know about.

If these risks are making you reconsider your opinion on Shanghai Xinnanyang Only Education & TechnologyLtd, 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.