Little Excitement Around Shanghai Xuerong Biotechnology Co.,Ltd.'s (SZSE:300511) Revenues As Shares Take 31% Pounding

The Shanghai Xuerong Biotechnology Co.,Ltd. (SZSE:300511) share price has fared very poorly over the last month, falling by a substantial 31%. For any long-term shareholders, the last month ends a year to forget by locking in a 63% share price decline.

After such a large drop in price, when close to half the companies operating in China's Food industry have price-to-sales ratios (or "P/S") above 1.4x, you may consider Shanghai Xuerong BiotechnologyLtd as an enticing stock to check out with its 0.6x 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 Shanghai Xuerong BiotechnologyLtd

How Shanghai Xuerong BiotechnologyLtd Has Been Performing

For instance, Shanghai Xuerong BiotechnologyLtd's receding revenue in recent times would have to be some food for thought. Perhaps the market believes the recent revenue performance isn't good enough to keep up the industry, causing the P/S ratio to suffer. 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.

Want the full picture on earnings, revenue and cash flow for the company? Then our free report on Shanghai Xuerong BiotechnologyLtd will help you shine a light on its historical performance.

Is There Any Revenue Growth Forecasted For Shanghai Xuerong BiotechnologyLtd?

The only time you'd be truly comfortable seeing a P/S as low as Shanghai Xuerong BiotechnologyLtd's is when the company's growth is on track to lag the industry.

In reviewing the last year of financials, we were disheartened to see the company's revenues fell to the tune of 10%. Regardless, revenue has managed to lift by a handy 7.3% in aggregate from three years ago, thanks to the earlier period of growth. Although it's been a bumpy ride, it's still fair to say the revenue growth recently has been mostly respectable for the company.

Comparing that to the industry, which is predicted to deliver 17% growth in the next 12 months, the company's momentum is weaker, based on recent medium-term annualised revenue results.

With this in consideration, it's easy to understand why Shanghai Xuerong BiotechnologyLtd's P/S falls short of the mark set by its industry peers. It seems most investors are expecting to see the recent limited growth rates continue into the future and are only willing to pay a reduced amount for the stock.

The Bottom Line On Shanghai Xuerong BiotechnologyLtd's P/S

Shanghai Xuerong BiotechnologyLtd's P/S has taken a dip along with its share price. 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.

In line with expectations, Shanghai Xuerong BiotechnologyLtd maintains its low P/S on the weakness of its recent three-year growth being lower than the wider industry forecast. Right now shareholders are accepting the low P/S as they concede future revenue probably won't provide any pleasant surprises. If recent medium-term revenue trends continue, it's hard to see the share price experience a reversal of fortunes anytime soon.

And what about other risks? Every company has them, and we've spotted 3 warning signs for Shanghai Xuerong BiotechnologyLtd you should know about.

If strong companies turning a profit tickle your fancy, then you'll want to check out this free list of interesting companies that trade on a low P/E (but have proven they can grow earnings).

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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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com