The Market Doesn't Like What It Sees From Foshan Yowant Technology Co.,Ltd's (SZSE:002291) Revenues Yet As Shares Tumble 25%

Unfortunately for some shareholders, the Foshan Yowant Technology Co.,Ltd (SZSE:002291) share price has dived 25% in the last thirty days, prolonging recent pain. The recent drop completes a disastrous twelve months for shareholders, who are sitting on a 73% loss during that time.

After such a large drop in price, Foshan Yowant TechnologyLtd may be sending buy signals at present with its price-to-sales (or "P/S") ratio of 0.8x, 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 5x aren't out of the ordinary. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's limited.

See our latest analysis for Foshan Yowant TechnologyLtd

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

Foshan Yowant TechnologyLtd 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 not, then existing shareholders have reason to be quite optimistic about the future direction of the share price.

Want the full picture on analyst estimates for the company? Then our free report on Foshan Yowant TechnologyLtd will help you uncover what's on the horizon.

How Is Foshan Yowant TechnologyLtd's Revenue Growth Trending?

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

Taking a look back first, we see that the company grew revenue by an impressive 25% last year. The latest three year period has also seen an excellent 127% overall rise in revenue, aided by its short-term performance. So we can start by confirming that the company has done a great job of growing revenue over that time.

Shifting to the future, estimates from the only analyst covering the company suggest revenue should grow by 9.6% over the next year. That's shaping up to be materially lower than the 12% growth forecast for the broader industry.

With this in consideration, its clear as to why Foshan Yowant TechnologyLtd's P/S is falling short industry peers. 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 Foshan Yowant TechnologyLtd's P/S Mean For Investors?

Foshan Yowant TechnologyLtd's P/S has taken a dip along with its share price. Typically, we'd caution against reading too much into price-to-sales ratios when settling on investment decisions, though it can reveal plenty about what other market participants think about the company.

As expected, our analysis of Foshan Yowant TechnologyLtd'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. It's hard to see the share price rising strongly in the near future under these circumstances.

You always need to take note of risks, for example - Foshan Yowant TechnologyLtd has 1 warning sign we think you should be aware of.

If you're unsure about the strength of Foshan Yowant TechnologyLtd's business, why not explore our interactive list of stocks with solid business fundamentals for some other companies you may have missed.

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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.