Jiangsu Skyray Instrument Co., Ltd. (SZSE:300165) Not Doing Enough For Some Investors As Its Shares Slump 30%

Unfortunately for some shareholders, the Jiangsu Skyray Instrument Co., Ltd. (SZSE:300165) share price has dived 30% in the last thirty days, prolonging recent pain. The recent drop completes a disastrous twelve months for shareholders, who are sitting on a 64% loss during that time.

Following the heavy fall in price, given close to half the companies in China's Medical Equipment industry have price-to-sales ratios (or "P/S") above 6.2x, you may consider Jiangsu Skyray Instrument as a highly attractive investment with its 1.3x P/S ratio. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's so limited.

See our latest analysis for Jiangsu Skyray Instrument

How Jiangsu Skyray Instrument Has Been Performing

For instance, Jiangsu Skyray Instrument's receding revenue in recent times would have to be some food for thought. It might be that many expect the disappointing revenue performance to continue or accelerate, which has repressed the P/S. 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 Jiangsu Skyray Instrument will help you shine a light on its historical performance.

Is There Any Revenue Growth Forecasted For Jiangsu Skyray Instrument?

Jiangsu Skyray Instrument'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 29% decrease to the company's top line. As a result, revenue from three years ago have also fallen 3.9% overall. Therefore, it's fair to say the revenue growth recently has been undesirable for the company.

In contrast to the company, the rest of the industry is expected to grow by 28% over the next year, which really puts the company's recent medium-term revenue decline into perspective.

With this in mind, we understand why Jiangsu Skyray Instrument's P/S is lower than most of its industry peers. Nonetheless, there's no guarantee the P/S has reached a floor yet with revenue going in reverse. There's potential for the P/S to fall to even lower levels if the company doesn't improve its top-line growth.

What We Can Learn From Jiangsu Skyray Instrument's P/S?

Shares in Jiangsu Skyray Instrument have plummeted and its P/S has followed suit. 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.

Our examination of Jiangsu Skyray Instrument confirms that the company's shrinking revenue over the past medium-term is a key factor in its low price-to-sales ratio, given the industry is projected to grow. Right now shareholders are accepting the low P/S as they concede future revenue probably won't provide any pleasant surprises either. If recent medium-term revenue trends continue, it's hard to see the share price moving strongly in either direction in the near future under these circumstances.

Having said that, be aware Jiangsu Skyray Instrument is showing 3 warning signs in our investment analysis, and 2 of those shouldn't be ignored.

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.