Investors Don't See Light At End Of Liaoning Oxiranchem,Inc.'s (SZSE:300082) Tunnel And Push Stock Down 27%

Liaoning Oxiranchem,Inc. (SZSE:300082) shares have had a horrible month, losing 27% 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 14% in that time.

Since its price has dipped substantially, it would be understandable if you think Liaoning OxiranchemInc is a stock with good investment prospects with a price-to-sales ratios (or "P/S") of 1x, considering almost half the companies in China's Chemicals industry have P/S ratios above 2.2x. However, the P/S might be low for a reason and it requires further investigation to determine if it's justified.

View our latest analysis for Liaoning OxiranchemInc

How Liaoning OxiranchemInc Has Been Performing

Liaoning OxiranchemInc 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. So while you could say the stock is cheap, investors will be looking for improvement before they see it as good value.

Keen to find out how analysts think Liaoning OxiranchemInc's future stacks up against the industry? In that case, our free report is a great place to start.

How Is Liaoning OxiranchemInc's Revenue Growth Trending?

Liaoning OxiranchemInc's P/S ratio would be typical for a company that's only expected to deliver limited growth, and importantly, perform worse than the industry.

In reviewing the last year of financials, we were disheartened to see the company's revenues fell to the tune of 9.9%. This means it has also seen a slide in revenue over the longer-term as revenue is down 44% in total over the last three years. Accordingly, shareholders would have felt downbeat about the medium-term rates of revenue growth.

Shifting to the future, estimates from the two analysts covering the company suggest revenue should grow by 20% over the next year. With the industry predicted to deliver 25% growth, the company is positioned for a weaker revenue result.

In light of this, it's understandable that Liaoning OxiranchemInc's P/S sits below the majority of other companies. It seems most investors are expecting to see limited future growth and are only willing to pay a reduced amount for the stock.

What Does Liaoning OxiranchemInc's P/S Mean For Investors?

Liaoning OxiranchemInc's recently weak share price has pulled its P/S back below other Chemicals 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.

We've established that Liaoning OxiranchemInc maintains its low P/S on the weakness of its forecast growth being lower than the wider industry, as expected. Right now shareholders are accepting the low P/S as they concede future revenue probably won't provide any pleasant surprises. The company will need a change of fortune to justify the P/S rising higher in the future.

And what about other risks? Every company has them, and we've spotted 2 warning signs for Liaoning OxiranchemInc (of which 1 is concerning!) you should know about.

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.