There's No Escaping BeiJing Seeyon Internet Software Corp.'s (SHSE:688369) Muted Revenues Despite A 31% Share Price Rise

BeiJing Seeyon Internet Software Corp. (SHSE:688369) shareholders would be excited to see that the share price has had a great month, posting a 31% gain and recovering from prior weakness. Looking further back, the 16% rise over the last twelve months isn't too bad notwithstanding the strength over the last 30 days.

In spite of the firm bounce in price, BeiJing Seeyon Internet Software's price-to-sales (or "P/S") ratio of 2.7x might still make it look like a strong buy right now compared to the wider Software industry in China, where around half of the companies have P/S ratios above 6.5x and even P/S above 11x are quite common. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's so limited.

Check out our latest analysis for BeiJing Seeyon Internet Software

How BeiJing Seeyon Internet Software Has Been Performing

While the industry has experienced revenue growth lately, BeiJing Seeyon Internet Software's revenue has gone into reverse gear, which is not great. The P/S ratio is probably low because investors think this poor revenue performance isn't going to get any better. So while you could say the stock is cheap, investors will be looking for improvement before they see it as good value.

If you'd like to see what analysts are forecasting going forward, you should check out our free report on BeiJing Seeyon Internet Software.

Is There Any Revenue Growth Forecasted For BeiJing Seeyon Internet Software?

In order to justify its P/S ratio, BeiJing Seeyon Internet Software would need to produce anemic growth that's substantially trailing the industry.

Retrospectively, the last year delivered a frustrating 13% decrease to the company's top line. At least revenue has managed not to go completely backwards from three years ago in aggregate, thanks to the earlier period of growth. Accordingly, shareholders probably wouldn't have been overly satisfied with the unstable medium-term growth rates.

Looking ahead now, revenue is anticipated to climb by 18% during the coming year according to the only analyst following the company. With the industry predicted to deliver 28% growth, the company is positioned for a weaker revenue result.

In light of this, it's understandable that BeiJing Seeyon Internet Software's P/S sits below the majority of other companies. Apparently many shareholders weren't comfortable holding on while the company is potentially eyeing a less prosperous future.

The Key Takeaway

Even after such a strong price move, BeiJing Seeyon Internet Software's P/S still trails the rest of the industry. 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.

We've established that BeiJing Seeyon Internet Software maintains its low P/S on the weakness of its forecast growth being lower than the wider industry, as expected. Shareholders' pessimism on the revenue prospects for the company seems to be the main contributor to the depressed P/S. Unless these conditions improve, they will continue to form a barrier for the share price around these levels.

You always need to take note of risks, for example - BeiJing Seeyon Internet Software has 1 warning sign we think you should be aware of.

Of course, profitable companies with a history of great earnings growth are generally safer bets. So you may wish to see this free collection of other companies that have reasonable P/E ratios and have grown earnings strongly.

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