B-SOFT Co.,Ltd. (SZSE:300451) Not Doing Enough For Some Investors As Its Shares Slump 25%

B-SOFT Co.,Ltd. (SZSE:300451) shares have had a horrible month, losing 25% after a relatively good period beforehand. The drop over the last 30 days has capped off a tough year for shareholders, with the share price down 32% in that time.

After such a large drop in price, when close to half the companies operating in China's Healthcare Services industry have price-to-sales ratios (or "P/S") above 6.3x, you may consider B-SOFTLtd as an enticing stock to check out with its 4x 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 limited.

View our latest analysis for B-SOFTLtd

How Has B-SOFTLtd Performed Recently?

B-SOFTLtd certainly has been doing a good job lately as it's been growing revenue more than most other companies. One possibility is that the P/S ratio is low because investors think this strong revenue performance might be less impressive moving forward. If the company manages to stay the course, then investors should be rewarded with a share price that matches its revenue figures.

If you'd like to see what analysts are forecasting going forward, you should check out our free report on B-SOFTLtd.

How Is B-SOFTLtd's Revenue Growth Trending?

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

If we review the last year of revenue growth, the company posted a worthy increase of 5.3%. However, this wasn't enough as the latest three year period has seen an unpleasant 5.6% overall drop in revenue. So unfortunately, we have to acknowledge that the company has not done a great job of growing revenue over that time.

Turning to the outlook, the next year should generate growth of 23% as estimated by the six analysts watching the company. With the industry predicted to deliver 29% growth, the company is positioned for a weaker revenue result.

With this information, we can see why B-SOFTLtd 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.

What We Can Learn From B-SOFTLtd's P/S?

B-SOFTLtd's recently weak share price has pulled its P/S back below other Healthcare Services companies. 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.

As expected, our analysis of B-SOFTLtd's analyst forecasts confirms that the company's underwhelming revenue outlook is a major contributor to its low P/S. At this stage investors feel the potential for an improvement in revenue isn't great enough to justify a higher P/S ratio. Unless these conditions improve, they will continue to form a barrier for the share price around these levels.

You should always think about risks. Case in point, we've spotted 1 warning sign for B-SOFTLtd you should be aware of.

If these risks are making you reconsider your opinion on B-SOFTLtd, 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.