Beijing Shunxin Agriculture Co.,Ltd's (SZSE:000860) Low P/S No Reason For Excitement

Beijing Shunxin Agriculture Co.,Ltd's (SZSE:000860) price-to-sales (or "P/S") ratio of 1.1x may look like a very appealing investment opportunity when you consider close to half the companies in the Beverage industry in China have P/S ratios greater than 5.8x. However, the P/S might be quite low for a reason and it requires further investigation to determine if it's justified.

See our latest analysis for Beijing Shunxin AgricultureLtd

What Does Beijing Shunxin AgricultureLtd's P/S Mean For Shareholders?

Beijing Shunxin AgricultureLtd could be doing better as its revenue has been going backwards lately while most other companies have been seeing positive revenue growth. Perhaps the P/S remains low as investors think the prospects of strong revenue growth aren't on the horizon. 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.

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How Is Beijing Shunxin AgricultureLtd's Revenue Growth Trending?

Beijing Shunxin AgricultureLtd's P/S ratio would be typical for a company that's expected to deliver very poor growth or even falling revenue, and importantly, perform much worse than the industry.

Retrospectively, the last year delivered a frustrating 8.0% decrease to the company's top line. The last three years don't look nice either as the company has shrunk revenue by 30% 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 9.1% during the coming year according to the four analysts following the company. Meanwhile, the rest of the industry is forecast to expand by 17%, which is noticeably more attractive.

With this information, we can see why Beijing Shunxin AgricultureLtd is trading at a P/S lower than the industry. It seems most investors are expecting to see limited future growth and are only willing to pay a reduced amount for the stock.

The Key Takeaway

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.

As we suspected, our examination of Beijing Shunxin AgricultureLtd's analyst forecasts revealed that its inferior revenue outlook is contributing to its low P/S. Shareholders' pessimism on the revenue prospects for the company seems to be the main contributor to the depressed P/S. It's hard to see the share price rising strongly in the near future under these circumstances.

A lot of potential risks can sit within a company's balance sheet. Our free balance sheet analysis for Beijing Shunxin AgricultureLtd with six simple checks will allow you to discover any risks that could be an issue.

If these risks are making you reconsider your opinion on Beijing Shunxin AgricultureLtd, 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.