Qi An Xin Technology Group Inc.'s (SHSE:688561) Prospects Need A Boost To Lift Shares

You may think that with a price-to-sales (or "P/S") ratio of 2.5x Qi An Xin Technology Group Inc. (SHSE:688561) is a stock worth checking out, seeing as almost half of all the Software companies in China have P/S ratios greater than 4.2x and even P/S higher than 7x aren't out of the ordinary. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the reduced P/S.

Check out our latest analysis for Qi An Xin Technology Group

How Has Qi An Xin Technology Group Performed Recently?

Qi An Xin Technology Group could be doing better as its revenue has been going backwards lately while most other companies have been seeing positive revenue growth. It seems that many are expecting the poor revenue performance to persist, which has repressed the P/S ratio. If this is the case, then existing shareholders will probably struggle to get excited about the future direction of the share price.

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

Is There Any Revenue Growth Forecasted For Qi An Xin Technology Group?

The only time you'd be truly comfortable seeing a P/S as low as Qi An Xin Technology Group's is when the company's growth is on track to lag the industry.

Retrospectively, the last year delivered a frustrating 4.1% decrease to the company's top line. Even so, admirably revenue has lifted 42% in aggregate from three years ago, notwithstanding the last 12 months. Accordingly, while they would have preferred to keep the run going, shareholders would definitely welcome the medium-term rates of revenue growth.

Looking ahead now, revenue is anticipated to climb by 16% per annum during the coming three years according to the ten analysts following the company. Meanwhile, the rest of the industry is forecast to expand by 20% each year, which is noticeably more attractive.

In light of this, it's understandable that Qi An Xin Technology Group'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.

What Does Qi An Xin Technology Group's P/S Mean For Investors?

It's argued the price-to-sales ratio is an inferior measure of value within certain industries, but it can be a powerful business sentiment indicator.

We've established that Qi An Xin Technology Group maintains its low P/S on the weakness of its forecast growth being lower than the wider industry, as expected. Right now shareholders are accepting the low P/S as they concede future revenue probably won't provide any pleasant surprises. It's hard to see the share price rising strongly in the near future under these circumstances.

Don't forget that there may be other risks. For instance, we've identified 1 warning sign for Qi An Xin Technology Group that 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.