Slammed 26% Shunya International Martech (Beijing) Co., Ltd. (SZSE:300612) Screens Well Here But There Might Be A Catch

Shunya International Martech (Beijing) Co., Ltd. (SZSE:300612) shareholders that were waiting for something to happen have been dealt a blow with a 26% share price drop in the last month. The drop over the last 30 days has capped off a tough year for shareholders, with the share price down 47% in that time.

In spite of the heavy fall in price, you could still be forgiven for feeling indifferent about Shunya International Martech (Beijing)'s P/S ratio of 2.1x, since the median price-to-sales (or "P/S") ratio for the Media industry in China is also close to 2.4x. While this might not raise any eyebrows, if the P/S ratio is not justified investors could be missing out on a potential opportunity or ignoring looming disappointment.

View our latest analysis for Shunya International Martech (Beijing)

How Shunya International Martech (Beijing) Has Been Performing

Shunya International Martech (Beijing) has been doing a decent job lately as it's been growing revenue at a reasonable pace. It might be that many expect the respectable revenue performance to only match most other companies over the coming period, which has kept the P/S from rising. If you like the company, you'd be hoping this isn't the case so that you could potentially pick up some stock while it's not quite in favour.

Although there are no analyst estimates available for Shunya International Martech (Beijing), take a look at this free data-rich visualisation to see how the company stacks up on earnings, revenue and cash flow.

How Is Shunya International Martech (Beijing)'s Revenue Growth Trending?

In order to justify its P/S ratio, Shunya International Martech (Beijing) would need to produce growth that's similar to the industry.

Taking a look back first, we see that the company managed to grow revenues by a handy 5.1% last year. The latest three year period has also seen an excellent 100% overall rise in revenue, aided somewhat by its short-term performance. Accordingly, shareholders would have definitely welcomed those medium-term rates of revenue growth.

Comparing that recent medium-term revenue trajectory with the industry's one-year growth forecast of 20% shows it's noticeably more attractive.

With this information, we find it interesting that Shunya International Martech (Beijing) is trading at a fairly similar P/S compared to the industry. Apparently some shareholders believe the recent performance is at its limits and have been accepting lower selling prices.

What Does Shunya International Martech (Beijing)'s P/S Mean For Investors?

With its share price dropping off a cliff, the P/S for Shunya International Martech (Beijing) looks to be in line with the rest of the Media industry. 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.

We didn't quite envision Shunya International Martech (Beijing)'s P/S sitting in line with the wider industry, considering the revenue growth over the last three-year is higher than the current industry outlook. It'd be fair to assume that potential risks the company faces could be the contributing factor to the lower than expected P/S. At least the risk of a price drop looks to be subdued if recent medium-term revenue trends continue, but investors seem to think future revenue could see some volatility.

And what about other risks? Every company has them, and we've spotted 4 warning signs for Shunya International Martech (Beijing) (of which 1 is significant!) you should know about.

If you're unsure about the strength of Shunya International Martech (Beijing)'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.