Revenues Working Against Thalys Medical Technology Group Corporation's (SHSE:603716) Share Price Following 30% Dive

Thalys Medical Technology Group Corporation (SHSE:603716) shares have retraced a considerable 30% 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 36% share price drop.

Following the heavy fall in price, Thalys Medical Technology Group's price-to-sales (or "P/S") ratio of 0.7x might make it look like a strong buy right now compared to the wider Biotechs industry in China, where around half of the companies have P/S ratios above 6.7x and even P/S above 12x are quite common. However, the P/S might be quite low for a reason and it requires further investigation to determine if it's justified.

See our latest analysis for Thalys Medical Technology Group

What Does Thalys Medical Technology Group's Recent Performance Look Like?

For instance, Thalys Medical Technology Group's receding revenue in recent times would have to be some food for thought. It might be that many expect the disappointing revenue performance to continue or accelerate, which has repressed the P/S. 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 out of favour.

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

How Is Thalys Medical Technology Group's Revenue Growth Trending?

In order to justify its P/S ratio, Thalys Medical Technology Group would need to produce anemic growth that's substantially trailing the industry.

In reviewing the last year of financials, we were disheartened to see the company's revenues fell to the tune of 8.6%. This means it has also seen a slide in revenue over the longer-term as revenue is down 27% in total over the last three years. So unfortunately, we have to acknowledge that the company has not done a great job of growing revenue over that time.

In contrast to the company, the rest of the industry is expected to grow by 57% over the next year, which really puts the company's recent medium-term revenue decline into perspective.

With this information, we are not surprised that Thalys Medical Technology Group is trading at a P/S lower than the industry. Nonetheless, there's no guarantee the P/S has reached a floor yet with revenue going in reverse. There's potential for the P/S to fall to even lower levels if the company doesn't improve its top-line growth.

The Final Word

Shares in Thalys Medical Technology Group have plummeted and its P/S has followed suit. It's argued the price-to-sales ratio is an inferior measure of value within certain industries, but it can be a powerful business sentiment indicator.

It's no surprise that Thalys Medical Technology Group maintains its low P/S off the back of its sliding revenue over the medium-term. At this stage investors feel the potential for an improvement in revenue isn't great enough to justify a higher P/S ratio. If recent medium-term revenue trends continue, it's hard to see the share price moving strongly in either direction in the near future under these circumstances.

You need to take note of risks, for example - Thalys Medical Technology Group has 3 warning signs (and 2 which are potentially serious) we think you should know about.

If these risks are making you reconsider your opinion on Thalys Medical Technology Group, 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.