The Market Doesn't Like What It Sees From Beijing Baination Pictures Co.,Ltd.'s (SZSE:300291) Revenues Yet As Shares Tumble 26%

Beijing Baination Pictures Co.,Ltd. (SZSE:300291) shares have retraced a considerable 26% in the last month, reversing a fair amount of their solid recent performance. Instead of being rewarded, shareholders who have already held through the last twelve months are now sitting on a 22% share price drop.

Following the heavy fall in price, Beijing Baination PicturesLtd's price-to-sales (or "P/S") ratio of 5x might make it look like a buy right now compared to the Entertainment industry in China, where around half of the companies have P/S ratios above 6.4x and even P/S above 13x are quite common. 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 Beijing Baination PicturesLtd

What Does Beijing Baination PicturesLtd's Recent Performance Look Like?

Recent times have been quite advantageous for Beijing Baination PicturesLtd as its revenue has been rising very briskly. It might be that many expect the strong revenue performance to degrade substantially, which has repressed the P/S ratio. Those who are bullish on Beijing Baination PicturesLtd will be hoping that this isn't the case, so that they can pick up the stock at a lower valuation.

Want the full picture on earnings, revenue and cash flow for the company? Then our free report on Beijing Baination PicturesLtd will help you shine a light on its historical performance.

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

Beijing Baination PicturesLtd'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.

Taking a look back first, we see that the company grew revenue by an impressive 108% last year. Revenue has also lifted 23% in aggregate from three years ago, mostly thanks to the last 12 months of growth. So we can start by confirming that the company has actually done a good job of growing revenue over that time.

Comparing the recent medium-term revenue trends against the industry's one-year growth forecast of 23% shows it's noticeably less attractive.

With this in consideration, it's easy to understand why Beijing Baination PicturesLtd's P/S falls short of the mark set by its industry peers. Apparently many shareholders weren't comfortable holding on to something they believe will continue to trail the wider industry.

What We Can Learn From Beijing Baination PicturesLtd's P/S?

The southerly movements of Beijing Baination PicturesLtd's shares means its P/S is now sitting at a pretty low level. Using the price-to-sales ratio alone to determine if you should sell your stock isn't sensible, however it can be a practical guide to the company's future prospects.

In line with expectations, Beijing Baination PicturesLtd 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. Unless the recent medium-term conditions improve, they will continue to form a barrier for the share price around these levels.

It's always necessary to consider the ever-present spectre of investment risk. We've identified 1 warning sign with Beijing Baination PicturesLtd, and understanding should be part of your investment process.

If these risks are making you reconsider your opinion on Beijing Baination PicturesLtd, explore our interactive list of high quality stocks to get an idea of what else is out there.

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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.