Nanjing Central Emporium (Group) Stocks Co., Ltd.'s (SHSE:600280) 31% Dip Still Leaving Some Shareholders Feeling Restless Over Its P/SRatio

Nanjing Central Emporium (Group) Stocks Co., Ltd. (SHSE:600280) shares have retraced a considerable 31% 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 38% share price drop.

In spite of the heavy fall in price, you could still be forgiven for feeling indifferent about Nanjing Central Emporium (Group) Stocks' P/S ratio of 1.2x, since the median price-to-sales (or "P/S") ratio for the Multiline Retail industry in China is also close to 1.3x. Although, it's not wise to simply ignore the P/S without explanation as investors may be disregarding a distinct opportunity or a costly mistake.

Check out our latest analysis for Nanjing Central Emporium (Group) Stocks

What Does Nanjing Central Emporium (Group) Stocks' P/S Mean For Shareholders?

The recent revenue growth at Nanjing Central Emporium (Group) Stocks would have to be considered satisfactory if not spectacular. One possibility is that the P/S is moderate because investors think this good revenue growth might only be parallel to the broader industry in the near future. If not, then at least existing shareholders probably aren't too pessimistic about the future direction of the share price.

Although there are no analyst estimates available for Nanjing Central Emporium (Group) Stocks, take a look at this free data-rich visualisation to see how the company stacks up on earnings, revenue and cash flow.

Do Revenue Forecasts Match The P/S Ratio?

Nanjing Central Emporium (Group) Stocks' P/S ratio would be typical for a company that's only expected to deliver moderate growth, and importantly, perform in line with the industry.

If we review the last year of revenue growth, the company posted a worthy increase of 4.9%. Still, lamentably revenue has fallen 34% in aggregate from three years ago, which is disappointing. Therefore, it's fair to say the revenue growth recently has been undesirable for the company.

In contrast to the company, the rest of the industry is expected to grow by 15% over the next year, which really puts the company's recent medium-term revenue decline into perspective.

In light of this, it's somewhat alarming that Nanjing Central Emporium (Group) Stocks' P/S sits in line with the majority of other companies. It seems most investors are ignoring the recent poor growth rate and are hoping for a turnaround in the company's business prospects. Only the boldest would assume these prices are sustainable as a continuation of recent revenue trends is likely to weigh on the share price eventually.

The Bottom Line On Nanjing Central Emporium (Group) Stocks' P/S

Nanjing Central Emporium (Group) Stocks' plummeting stock price has brought its P/S back to a similar region as the rest of the industry. 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.

The fact that Nanjing Central Emporium (Group) Stocks currently trades at a P/S on par with the rest of the industry is surprising to us since its recent revenues have been in decline over the medium-term, all while the industry is set to grow. When we see revenue heading backwards in the context of growing industry forecasts, it'd make sense to expect a possible share price decline on the horizon, sending the moderate P/S lower. If recent medium-term revenue trends continue, it will place shareholders' investments at risk and potential investors in danger of paying an unnecessary premium.

Before you take the next step, you should know about the 2 warning signs for Nanjing Central Emporium (Group) Stocks that we have uncovered.

If these risks are making you reconsider your opinion on Nanjing Central Emporium (Group) Stocks, 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.