Shaanxi Broadcast & TV Network Intermediary(Group)Co.,Ltd. (SHSE:600831) Looks Inexpensive After Falling 26% But Perhaps Not Attractive Enough

The Shaanxi Broadcast & TV Network Intermediary(Group)Co.,Ltd. (SHSE:600831) share price has fared very poorly over the last month, falling by a substantial 26%. Instead of being rewarded, shareholders who have already held through the last twelve months are now sitting on a 45% share price drop.

Following the heavy fall in price, Shaanxi Broadcast & TV Network Intermediary(Group)Co.Ltd may be sending buy signals at present with its price-to-sales (or "P/S") ratio of 0.9x, considering almost half of all companies in the Media industry in China have P/S ratios greater than 2.3x and even P/S higher than 5x aren't out of the ordinary. 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 Shaanxi Broadcast & TV Network Intermediary(Group)Co.Ltd

How Shaanxi Broadcast & TV Network Intermediary(Group)Co.Ltd Has Been Performing

For instance, Shaanxi Broadcast & TV Network Intermediary(Group)Co.Ltd'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. Those who are bullish on Shaanxi Broadcast & TV Network Intermediary(Group)Co.Ltd will be hoping that this isn't the case so that they can pick up the stock at a lower valuation.

We don't have analyst forecasts, but you can see how recent trends are setting up the company for the future by checking out our free report on Shaanxi Broadcast & TV Network Intermediary(Group)Co.Ltd's earnings, revenue and cash flow.

What Are Revenue Growth Metrics Telling Us About The Low P/S?

The only time you'd be truly comfortable seeing a P/S as low as Shaanxi Broadcast & TV Network Intermediary(Group)Co.Ltd'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 16%. At least revenue has managed not to go completely backwards from three years ago in aggregate, thanks to the earlier period of growth. So it appears to us that the company has had a mixed result in terms of growing revenue over that time.

This is in contrast to the rest of the industry, which is expected to grow by 19% over the next year, materially higher than the company's recent medium-term annualised growth rates.

In light of this, it's understandable that Shaanxi Broadcast & TV Network Intermediary(Group)Co.Ltd's P/S sits below the majority of other companies. Apparently many shareholders weren't comfortable holding on to something they believe will continue to trail the wider industry.

What We Can Learn From Shaanxi Broadcast & TV Network Intermediary(Group)Co.Ltd's P/S?

Shaanxi Broadcast & TV Network Intermediary(Group)Co.Ltd's P/S has taken a dip along with its share price. 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 we suspected, our examination of Shaanxi Broadcast & TV Network Intermediary(Group)Co.Ltd revealed its three-year revenue trends are contributing to its low P/S, given they look worse than current industry expectations. 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.

It's always necessary to consider the ever-present spectre of investment risk. We've identified 2 warning signs with Shaanxi Broadcast & TV Network Intermediary(Group)Co.Ltd, and understanding them should be part of your investment process.

If companies with solid past earnings growth is up your alley, you may wish to see this free collection of other companies with strong earnings growth and low P/E ratios.

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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.