Little Excitement Around Shenzhen S-king Intelligent Equipment Co., Ltd.'s (SHSE:688328) Revenues As Shares Take 26% Pounding

Unfortunately for some shareholders, the Shenzhen S-king Intelligent Equipment Co., Ltd. (SHSE:688328) share price has dived 26% in the last thirty days, prolonging recent pain. The drop over the last 30 days has capped off a tough year for shareholders, with the share price down 14% in that time.

Since its price has dipped substantially, Shenzhen S-king Intelligent Equipment may be sending bullish signals at the moment with its price-to-sales (or "P/S") ratio of 3.3x, since almost half of all companies in the Semiconductor industry in China have P/S ratios greater than 6.5x and even P/S higher than 12x are not unusual. However, the P/S might be low for a reason and it requires further investigation to determine if it's justified.

See our latest analysis for Shenzhen S-king Intelligent Equipment

How Shenzhen S-king Intelligent Equipment Has Been Performing

As an illustration, revenue has deteriorated at Shenzhen S-king Intelligent Equipment over the last year, which is not ideal at all. 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. Those who are bullish on Shenzhen S-king Intelligent Equipment will be hoping that this isn't the case so that they can pick up the stock at a lower valuation.

Although there are no analyst estimates available for Shenzhen S-king Intelligent Equipment, take a look at this free data-rich visualisation to see how the company stacks up on earnings, revenue and cash flow.

What Are Revenue Growth Metrics Telling Us About The Low P/S?

In order to justify its P/S ratio, Shenzhen S-king Intelligent Equipment would need to produce sluggish growth that's trailing the industry.

Retrospectively, the last year delivered a frustrating 3.9% decrease to the company's top line. This means it has also seen a slide in revenue over the longer-term as revenue is down 13% in total over the last three years. Therefore, it's fair to say the revenue growth recently has been undesirable for the company.

Weighing that medium-term revenue trajectory against the broader industry's one-year forecast for expansion of 36% shows it's an unpleasant look.

With this information, we are not surprised that Shenzhen S-king Intelligent Equipment is trading at a P/S lower than the industry. However, we think shrinking revenues are unlikely to lead to a stable P/S over the longer term, which could set up shareholders for future disappointment. There's potential for the P/S to fall to even lower levels if the company doesn't improve its top-line growth.

The Bottom Line On Shenzhen S-king Intelligent Equipment's P/S

Shenzhen S-king Intelligent Equipment's recently weak share price has pulled its P/S back below other Semiconductor companies. 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 S-king Intelligent Equipment revealed its shrinking revenue over the medium-term is contributing to its low P/S, given the industry is set to grow. 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.

And what about other risks? Every company has them, and we've spotted 3 warning signs for Shenzhen S-king Intelligent Equipment (of which 2 make us uncomfortable!) you should know about.

If strong companies turning a profit tickle your fancy, then you'll want to check out this free list of interesting companies that trade on a low P/E (but have proven they can grow earnings).

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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.