Some Confidence Is Lacking In Shenzhen Asia Link Technology Development Co.,Ltd. (SZSE:002316) As Shares Slide 31%

Shenzhen Asia Link Technology Development Co.,Ltd. (SZSE:002316) shareholders that were waiting for something to happen have been dealt a blow with a 31% share price drop in the last month. The drop over the last 30 days has capped off a tough year for shareholders, with the share price down 33% in that time.

Although its price has dipped substantially, it's still not a stretch to say that Shenzhen Asia Link Technology DevelopmentLtd's price-to-sales (or "P/S") ratio of 2.1x right now seems quite "middle-of-the-road" compared to the Diversified Financial industry in China, where the median P/S ratio is around 1.8x. While this might not raise any eyebrows, if the P/S ratio is not justified investors could be missing out on a potential opportunity or ignoring looming disappointment.

View our latest analysis for Shenzhen Asia Link Technology DevelopmentLtd

What Does Shenzhen Asia Link Technology DevelopmentLtd's P/S Mean For Shareholders?

For instance, Shenzhen Asia Link Technology DevelopmentLtd's receding revenue in recent times would have to be some food for thought. Perhaps investors believe the recent revenue performance is enough to keep in line with the industry, which is keeping the P/S from dropping off. If you like the company, you'd at least be hoping this is the case so that you could potentially pick up some stock while it's not quite in favour.

Although there are no analyst estimates available for Shenzhen Asia Link Technology DevelopmentLtd, take a look at this free data-rich visualisation to see how the company stacks up on earnings, revenue and cash flow.

How Is Shenzhen Asia Link Technology DevelopmentLtd's Revenue Growth Trending?

The only time you'd be comfortable seeing a P/S like Shenzhen Asia Link Technology DevelopmentLtd's is when the company's growth is tracking the industry closely.

In reviewing the last year of financials, we were disheartened to see the company's revenues fell to the tune of 62%. This means it has also seen a slide in revenue over the longer-term as revenue is down 83% in total over the last three years. Accordingly, shareholders would have felt downbeat about the medium-term rates of revenue growth.

Weighing that medium-term revenue trajectory against the broader industry's one-year forecast for expansion of 7.1% shows it's an unpleasant look.

With this in mind, we find it worrying that Shenzhen Asia Link Technology DevelopmentLtd's P/S exceeds that of its industry peers. Apparently many investors in the company are way less bearish than recent times would indicate and aren't willing to let go of their stock right now. Only the boldest would assume these prices are sustainable as a continuation of recent revenue trends is likely to weigh on the share price eventually.

The Bottom Line On Shenzhen Asia Link Technology DevelopmentLtd's P/S

With its share price dropping off a cliff, the P/S for Shenzhen Asia Link Technology DevelopmentLtd looks to be in line with the rest of the Diversified Financial industry. 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.

The fact that Shenzhen Asia Link Technology DevelopmentLtd currently trades at a P/S on par with the rest of the industry is surprising to us since its recent revenues have been in decline over the medium-term, all while the industry is set 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. If recent medium-term revenue trends continue, it will place shareholders' investments at risk and potential investors in danger of paying an unnecessary premium.

You should always think about risks. Case in point, we've spotted 1 warning sign for Shenzhen Asia Link Technology DevelopmentLtd you should be aware of.

It's important to make sure you look for a great company, not just the first idea you come across. So if growing profitability aligns with your idea of a great company, take a peek at this free list of interesting companies with strong recent earnings growth (and a low P/E).

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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.