Market Participants Recognise iFLYTEK CO.,LTD's (SZSE:002230) Revenues

With a median price-to-sales (or "P/S") ratio of close to 5.4x in the Software industry in China, you could be forgiven for feeling indifferent about iFLYTEK CO.,LTD's (SZSE:002230) P/S ratio of 6.1x. Although, it's not wise to simply ignore the P/S without explanation as investors may be disregarding a distinct opportunity or a costly mistake.

See our latest analysis for iFLYTEKLTD

How Has iFLYTEKLTD Performed Recently?

iFLYTEKLTD hasn't been tracking well recently as its declining revenue compares poorly to other companies, which have seen some growth in their revenues on average. It might be that many expect the dour revenue performance to strengthen positively, which has kept the P/S from falling. You'd really hope so, otherwise you're paying a relatively elevated price for a company with this sort of growth profile.

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

Do Revenue Forecasts Match The P/S Ratio?

In order to justify its P/S ratio, iFLYTEKLTD would need to produce growth that's similar to the industry.

Taking a look back first, the company's revenue growth last year wasn't something to get excited about as it posted a disappointing decline of 6.6%. However, a few very strong years before that means that it was still able to grow revenue by an impressive 74% in total over the last three years. So we can start by confirming that the company has generally done a very good job of growing revenue over that time, even though it had some hiccups along the way.

Looking ahead now, revenue is anticipated to climb by 27% each year during the coming three years according to the analysts following the company. With the industry predicted to deliver 27% growth per year, the company is positioned for a comparable revenue result.

In light of this, it's understandable that iFLYTEKLTD's P/S sits in line with the majority of other companies. Apparently shareholders are comfortable to simply hold on while the company is keeping a low profile.

What We Can Learn From iFLYTEKLTD's P/S?

While the price-to-sales ratio shouldn't be the defining factor in whether you buy a stock or not, it's quite a capable barometer of revenue expectations.

Our look at iFLYTEKLTD's revenue growth estimates show that its P/S is about what we expect, as both metrics follow closely with the industry averages. At this stage investors feel the potential for an improvement or deterioration in revenue isn't great enough to push P/S in a higher or lower direction. All things considered, if the P/S and revenue estimates contain no major shocks, then it's hard to see the share price moving strongly in either direction in the near future.

Don't forget that there may be other risks. For instance, we've identified 2 warning signs for iFLYTEKLTD that you should be aware of.

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

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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.