Shenzhen New Nanshan Holding (Group) Co., Ltd. (SZSE:002314) Not Doing Enough For Some Investors As Its Shares Slump 28%

Shenzhen New Nanshan Holding (Group) Co., Ltd. (SZSE:002314) shares have had a horrible month, losing 28% after a relatively good period beforehand. Instead of being rewarded, shareholders who have already held through the last twelve months are now sitting on a 23% share price drop.

Since its price has dipped substantially, Shenzhen New Nanshan Holding (Group) may be sending bullish signals at the moment with its price-to-sales (or "P/S") ratio of 0.9x, since almost half of all companies in the Real Estate industry in China have P/S ratios greater than 2.2x and even P/S higher than 6x are not unusual. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the reduced P/S.

See our latest analysis for Shenzhen New Nanshan Holding (Group)

How Has Shenzhen New Nanshan Holding (Group) Performed Recently?

For example, consider that Shenzhen New Nanshan Holding (Group)'s financial performance has been poor lately as its revenue has been in decline. One possibility is that the P/S is low because investors think the company won't do enough to avoid underperforming the broader industry in the near future. However, if this doesn't eventuate then existing shareholders may be feeling 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 Shenzhen New Nanshan Holding (Group)'s earnings, revenue and cash flow.

Is There Any Revenue Growth Forecasted For Shenzhen New Nanshan Holding (Group)?

There's an inherent assumption that a company should underperform the industry for P/S ratios like Shenzhen New Nanshan Holding (Group)'s to be considered reasonable.

In reviewing the last year of financials, we were disheartened to see the company's revenues fell to the tune of 59%. The last three years don't look nice either as the company has shrunk revenue by 47% in aggregate. Accordingly, shareholders would have felt downbeat about the medium-term rates of revenue growth.

Comparing that to the industry, which is predicted to deliver 13% growth in the next 12 months, the company's downward momentum based on recent medium-term revenue results is a sobering picture.

In light of this, it's understandable that Shenzhen New Nanshan Holding (Group)'s P/S would sit below the majority of other companies. Nonetheless, there's no guarantee the P/S has reached a floor yet with revenue going in reverse. Even just maintaining these prices could be difficult to achieve as recent revenue trends are already weighing down the shares.

The Final Word

The southerly movements of Shenzhen New Nanshan Holding (Group)'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.

It's no surprise that Shenzhen New Nanshan Holding (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. Unless the recent medium-term conditions improve, they will continue to form a barrier for the share price around these levels.

Don't forget that there may be other risks. For instance, we've identified 2 warning signs for Shenzhen New Nanshan Holding (Group) that you should be aware of.

If you're unsure about the strength of Shenzhen New Nanshan Holding (Group)'s business, why not explore our interactive list of stocks with solid business fundamentals for some other companies you may have missed.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.