What You Can Learn From Beijing Deep Glint Technology Co., Ltd.'s (SHSE:688207) P/SAfter Its 28% Share Price Crash

Unfortunately for some shareholders, the Beijing Deep Glint Technology Co., Ltd. (SHSE:688207) share price has dived 28% in the last thirty days, prolonging recent pain. The recent drop completes a disastrous twelve months for shareholders, who are sitting on a 62% loss during that time.

In spite of the heavy fall in price, Beijing Deep Glint Technology may still be sending very bearish signals at the moment with a price-to-sales (or "P/S") ratio of 11.1x, since almost half of all companies in the Software industry in China have P/S ratios under 4.5x and even P/S lower than 2x are not unusual. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the highly elevated P/S.

See our latest analysis for Beijing Deep Glint Technology

What Does Beijing Deep Glint Technology's Recent Performance Look Like?

While the industry has experienced revenue growth lately, Beijing Deep Glint Technology's revenue has gone into reverse gear, which is not great. It might be that many expect the dour revenue performance to recover substantially, which has kept the P/S from collapsing. However, if this isn't the case, investors might get caught out paying too much for the stock.

Keen to find out how analysts think Beijing Deep Glint Technology's future stacks up against the industry? In that case, our free report is a great place to start.

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

The only time you'd be truly comfortable seeing a P/S as steep as Beijing Deep Glint Technology's is when the company's growth is on track to outshine the industry decidedly.

Retrospectively, the last year delivered a frustrating 26% decrease to the company's top line. This has soured the latest three-year period, which nevertheless managed to deliver a decent 8.0% overall rise in revenue. Although it's been a bumpy ride, it's still fair to say the revenue growth recently has been mostly respectable for the company.

Shifting to the future, estimates from the sole analyst covering the company suggest revenue should grow by 121% over the next year. With the industry only predicted to deliver 28%, the company is positioned for a stronger revenue result.

With this in mind, it's not hard to understand why Beijing Deep Glint Technology's P/S is high relative to its industry peers. It seems most investors are expecting this strong future growth and are willing to pay more for the stock.

What Does Beijing Deep Glint Technology's P/S Mean For Investors?

Even after such a strong price drop, Beijing Deep Glint Technology's P/S still exceeds the industry median significantly. We'd say the price-to-sales ratio's power isn't primarily as a valuation instrument but rather to gauge current investor sentiment and future expectations.

Our look into Beijing Deep Glint Technology shows that its P/S ratio remains high on the merit of its strong future revenues. It appears that shareholders are confident in the company's future revenues, which is propping up the P/S. Unless these conditions change, they will continue to provide strong support to the share price.

You should always think about risks. Case in point, we've spotted 1 warning sign for Beijing Deep Glint Technology you should be aware of.

It's important to make sure you look for a great company, not just the first idea you come across. So if growing profitability aligns with your idea of a great company, take a peek at this free list of interesting companies with strong recent earnings growth (and a low P/E).

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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.