Investors Give Foshan Yowant Technology Co.,Ltd (SZSE:002291) Shares A 30% Hiding

The Foshan Yowant Technology Co.,Ltd (SZSE:002291) share price has fared very poorly over the last month, falling by a substantial 30%. The recent drop completes a disastrous twelve months for shareholders, who are sitting on a 69% loss during that time.

Following the heavy fall in price, Foshan Yowant TechnologyLtd may be sending buy signals at present with its price-to-sales (or "P/S") ratio of 1.1x, considering almost half of all companies in the Media industry in China have P/S ratios greater than 2.4x and even P/S higher than 6x 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 Foshan Yowant TechnologyLtd

What Does Foshan Yowant TechnologyLtd's P/S Mean For Shareholders?

Foshan Yowant TechnologyLtd's revenue growth of late has been pretty similar to most other companies. It might be that many expect the mediocre revenue performance to degrade, which has repressed the P/S ratio. If not, then existing shareholders have reason to be optimistic about the future direction of the share price.

If you'd like to see what analysts are forecasting going forward, you should check out our free report on Foshan Yowant TechnologyLtd.

Is There Any Revenue Growth Forecasted For Foshan Yowant TechnologyLtd?

There's an inherent assumption that a company should underperform the industry for P/S ratios like Foshan Yowant TechnologyLtd's to be considered reasonable.

If we review the last year of revenue growth, the company posted a worthy increase of 3.2%. This was backed up an excellent period prior to see revenue up by 104% in total over the last three years. Therefore, it's fair to say the revenue growth recently has been superb for the company.

Turning to the outlook, the next year should generate growth of 45% as estimated by the lone analyst watching the company. That's shaping up to be materially higher than the 20% growth forecast for the broader industry.

In light of this, it's peculiar that Foshan Yowant TechnologyLtd's P/S sits below the majority of other companies. Apparently some shareholders are doubtful of the forecasts and have been accepting significantly lower selling prices.

The Bottom Line On Foshan Yowant TechnologyLtd's P/S

Foshan Yowant TechnologyLtd's P/S has taken a dip along with its share price. While the price-to-sales ratio shouldn't be the defining factor in whether you buy a stock or not, it's quite a capable barometer of revenue expectations.

Foshan Yowant TechnologyLtd's analyst forecasts revealed that its superior revenue outlook isn't contributing to its P/S anywhere near as much as we would have predicted. When we see strong growth forecasts like this, we can only assume potential risks are what might be placing significant pressure on the P/S ratio. At least price risks look to be very low, but investors seem to think future revenues could see a lot of volatility.

There are also other vital risk factors to consider before investing and we've discovered 1 warning sign for Foshan Yowant TechnologyLtd 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.