Little Excitement Around Lisheng Sports (Shanghai) Co.,Ltd's (SZSE:002858) Revenues As Shares Take 29% Pounding

The Lisheng Sports (Shanghai) Co.,Ltd (SZSE:002858) share price has fared very poorly over the last month, falling by a substantial 29%. The recent drop completes a disastrous twelve months for shareholders, who are sitting on a 58% loss during that time.

Following the heavy fall in price, Lisheng Sports (Shanghai)Ltd may be sending buy signals at present with its price-to-sales (or "P/S") ratio of 4.3x, considering almost half of all companies in the Entertainment industry in China have P/S ratios greater than 5.8x and even P/S higher than 9x aren't out of the ordinary. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the reduced P/S.

View our latest analysis for Lisheng Sports (Shanghai)Ltd

How Lisheng Sports (Shanghai)Ltd Has Been Performing

Recent times have been quite advantageous for Lisheng Sports (Shanghai)Ltd as its revenue has been rising very briskly. One possibility is that the P/S ratio is low because investors think this strong revenue growth might actually underperform the broader industry in the near future. If that doesn't eventuate, then existing shareholders have reason to be quite optimistic about the future direction of the share price.

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 Lisheng Sports (Shanghai)Ltd's earnings, revenue and cash flow.

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

There's an inherent assumption that a company should underperform the industry for P/S ratios like Lisheng Sports (Shanghai)Ltd's to be considered reasonable.

If we review the last year of revenue growth, the company posted a terrific increase of 57%. The strong recent performance means it was also able to grow revenue by 37% in total over the last three years. So we can start by confirming that the company has done a great job of growing revenue over that time.

Comparing the recent medium-term revenue trends against the industry's one-year growth forecast of 22% shows it's noticeably less attractive.

With this information, we can see why Lisheng Sports (Shanghai)Ltd is trading at a P/S lower than the industry. Apparently many shareholders weren't comfortable holding on to something they believe will continue to trail the wider industry.

What Does Lisheng Sports (Shanghai)Ltd's P/S Mean For Investors?

The southerly movements of Lisheng Sports (Shanghai)Ltd's shares means its P/S is now sitting at a pretty low level. 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.

In line with expectations, Lisheng Sports (Shanghai)Ltd maintains its low P/S on the weakness of its recent three-year growth being lower than the wider industry forecast. 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.

Don't forget that there may be other risks. For instance, we've identified 3 warning signs for Lisheng Sports (Shanghai)Ltd (1 doesn't sit too well with us) you should be aware of.

If strong companies turning a profit tickle your fancy, then you'll want to check out this free list of interesting companies that trade on a low P/E (but have proven they can grow earnings).

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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.