Shenzhen Kingkey Smart Agriculture Times Co.,Ltd's (SZSE:000048) Business And Shares Still Trailing The Industry

With a price-to-sales (or "P/S") ratio of 0.7x Shenzhen Kingkey Smart Agriculture Times Co.,Ltd (SZSE:000048) may be sending bullish signals at the moment, given that almost half of all the Real Estate companies in China have P/S ratios greater than 1.6x and even P/S higher than 4x are not unusual. 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 Shenzhen Kingkey Smart Agriculture TimesLtd

How Has Shenzhen Kingkey Smart Agriculture TimesLtd Performed Recently?

Recent times have been advantageous for Shenzhen Kingkey Smart Agriculture TimesLtd as its revenues have been rising faster than most other companies. It might be that many expect the strong revenue performance to degrade substantially, which has repressed the share price, and thus the P/S ratio. 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 analyst estimates for the company? Then our free report on Shenzhen Kingkey Smart Agriculture TimesLtd will help you uncover what's on the horizon.

How Is Shenzhen Kingkey Smart Agriculture TimesLtd's Revenue Growth Trending?

The only time you'd be truly comfortable seeing a P/S as low as Shenzhen Kingkey Smart Agriculture TimesLtd's is when the company's growth is on track to lag the industry.

If we review the last year of revenue growth, we see the company's revenues grew exponentially. The latest three year period has also seen an excellent 213% overall rise in revenue, aided by its incredible short-term performance. So we can start by confirming that the company has done a great job of growing revenue over that time.

Looking ahead now, revenue is anticipated to slump, contracting by 26% during the coming year according to the two analysts following the company. That's not great when the rest of the industry is expected to grow by 9.3%.

With this in consideration, we find it intriguing that Shenzhen Kingkey Smart Agriculture TimesLtd's P/S is closely matching its industry peers. However, shrinking revenues are unlikely to lead to a stable P/S over the longer term. There's potential for the P/S to fall to even lower levels if the company doesn't improve its top-line growth.

What We Can Learn From Shenzhen Kingkey Smart Agriculture TimesLtd's P/S?

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.

As we suspected, our examination of Shenzhen Kingkey Smart Agriculture TimesLtd's analyst forecasts revealed that its outlook for shrinking revenue is contributing to its low P/S. Right now shareholders are accepting the low P/S as they concede future revenue probably won't provide any pleasant surprises. It's hard to see the share price rising strongly in the near future under these circumstances.

It is also worth noting that we have found 4 warning signs for Shenzhen Kingkey Smart Agriculture TimesLtd (3 make us uncomfortable!) that you need to take into consideration.

Of course, profitable companies with a history of great earnings growth are generally safer bets. So you may wish to see this free collection of other companies that have reasonable P/E ratios and have grown earnings strongly.

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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.