Fujian Foxit Software Development Joint Stock Co., Ltd.'s (SHSE:688095) Popularity With Investors Under Threat As Stock Sinks 25%

Fujian Foxit Software Development Joint Stock Co., Ltd. (SHSE:688095) shareholders won't be pleased to see that the share price has had a very rough month, dropping 25% and undoing the prior period's positive performance. The recent drop has obliterated the annual return, with the share price now down 5.8% over that longer period.

In spite of the heavy fall in price, Fujian Foxit Software Development may still be sending bearish signals at the moment with its price-to-sales (or "P/S") ratio of 7.8x, since almost half of all companies in the Software in China have P/S ratios under 6.1x and even P/S lower than 3x 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 as high as it is.

View our latest analysis for Fujian Foxit Software Development

What Does Fujian Foxit Software Development's Recent Performance Look Like?

Recent times have been advantageous for Fujian Foxit Software Development as its revenues have been rising faster than most other companies. It seems the market expects this form will continue into the future, hence the elevated P/S ratio. You'd really hope so, otherwise you're paying a pretty hefty price for no particular reason.

If you'd like to see what analysts are forecasting going forward, you should check out our free report on Fujian Foxit Software Development.

How Is Fujian Foxit Software Development's Revenue Growth Trending?

In order to justify its P/S ratio, Fujian Foxit Software Development would need to produce impressive growth in excess of the industry.

Taking a look back first, we see that the company managed to grow revenues by a handy 14% last year. The latest three year period has also seen a 29% overall rise in revenue, aided somewhat by its short-term performance. So we can start by confirming that the company has actually done a good job of growing revenue over that time.

Shifting to the future, estimates from the six analysts covering the company suggest revenue should grow by 19% over the next year. Meanwhile, the rest of the industry is forecast to expand by 30%, which is noticeably more attractive.

With this in consideration, we believe it doesn't make sense that Fujian Foxit Software Development's P/S is outpacing its industry peers. It seems most investors are hoping for a turnaround in the company's business prospects, but the analyst cohort is not so confident this will happen. Only the boldest would assume these prices are sustainable as this level of revenue growth is likely to weigh heavily on the share price eventually.

The Bottom Line On Fujian Foxit Software Development's P/S

Despite the recent share price weakness, Fujian Foxit Software Development's P/S remains higher than most other companies in the industry. Typically, we'd caution against reading too much into price-to-sales ratios when settling on investment decisions, though it can reveal plenty about what other market participants think about the company.

It comes as a surprise to see Fujian Foxit Software Development trade at such a high P/S given the revenue forecasts look less than stellar. When we see a weak revenue outlook, we suspect the share price faces a much greater risk of declining, bringing back down the P/S figures. At these price levels, investors should remain cautious, particularly if things don't improve.

Don't forget that there may be other risks. For instance, we've identified 3 warning signs for Fujian Foxit Software Development that you should be aware of.

If these risks are making you reconsider your opinion on Fujian Foxit Software Development, explore our interactive list of high quality stocks to get an idea of what else is out there.

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