Shaanxi Broadcast & TV Network Intermediary(Group)Co.,Ltd.'s (SHSE:600831) Prospects Need A Boost To Lift Shares

With a price-to-sales (or "P/S") ratio of 0.9x Shaanxi Broadcast & TV Network Intermediary(Group)Co.,Ltd. (SHSE:600831) may be sending bullish signals at the moment, given that almost half of all the Media companies in China have P/S ratios greater than 2.7x and even P/S higher than 6x are not unusual. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the reduced P/S.

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 example, consider that Shaanxi Broadcast & TV Network Intermediary(Group)Co.Ltd's financial performance has been poor lately as its revenue has been in decline. 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.

Although there are no analyst estimates available for Shaanxi Broadcast & TV Network Intermediary(Group)Co.Ltd, take a look at this free data-rich visualisation to see how the company stacks up on earnings, revenue and cash flow.

How Is Shaanxi Broadcast & TV Network Intermediary(Group)Co.Ltd's Revenue Growth Trending?

Shaanxi Broadcast & TV Network Intermediary(Group)Co.Ltd'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 34%. This means it has also seen a slide in revenue over the longer-term as revenue is down 32% in total over the last three years. 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 13% over the next year, which really puts the company's recent medium-term revenue decline into perspective.

With this in mind, we understand why Shaanxi Broadcast & TV Network Intermediary(Group)Co.Ltd's P/S is lower than most of its industry peers. However, we think shrinking revenues are unlikely to lead to a stable P/S over the longer term, which could set up shareholders for future disappointment. There's potential for the P/S to fall to even lower levels if the company doesn't improve its top-line growth.

What Does Shaanxi Broadcast & TV Network Intermediary(Group)Co.Ltd's P/S Mean For Investors?

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 Shaanxi Broadcast & TV Network Intermediary(Group)Co.Ltd 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.

There are also other vital risk factors to consider before investing and we've discovered 2 warning signs for Shaanxi Broadcast & TV Network Intermediary(Group)Co.Ltd that you should be aware of.

Of course, profitable companies with a history of great earnings growth are generally safer bets. So you may wish to see this free collection of other companies that have reasonable P/E ratios and have grown earnings strongly.

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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.