Benign Growth For Business-intelligence of Oriental Nations Corporation Ltd. (SZSE:300166) Underpins Its Share Price

You may think that with a price-to-sales (or "P/S") ratio of 2.8x Business-intelligence of Oriental Nations Corporation Ltd. (SZSE:300166) is a stock worth checking out, seeing as almost half of all the Software companies in China have P/S ratios greater than 4.1x 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.

See our latest analysis for Business-intelligence of Oriental Nations

How Has Business-intelligence of Oriental Nations Performed Recently?

Business-intelligence of Oriental Nations' revenue growth of late has been pretty similar to most other companies. One possibility is that the P/S ratio is low because investors think this modest revenue performance may begin to slide. If not, then existing shareholders have reason to be optimistic about the future direction of the share price.

Want the full picture on analyst estimates for the company? Then our free report on Business-intelligence of Oriental Nations will help you uncover what's on the horizon.

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

The only time you'd be truly comfortable seeing a P/S as low as Business-intelligence of Oriental Nations' is when the company's growth is on track to lag the industry.

Taking a look back first, we see that the company managed to grow revenues by a handy 3.9% last year. Revenue has also lifted 10% in aggregate from three years ago, partly thanks to the last 12 months of growth. So we can start by confirming that the company has actually done a good job of growing revenue over that time.

Turning to the outlook, the next year should generate growth of 12% as estimated by the only analyst watching the company. That's shaping up to be materially lower than the 26% growth forecast for the broader industry.

With this information, we can see why Business-intelligence of Oriental Nations is trading at a P/S lower than the industry. It seems most investors are expecting to see limited future growth and are only willing to pay a reduced amount for the stock.

What We Can Learn From Business-intelligence of Oriental Nations' P/S?

Generally, our preference is to limit the use of the price-to-sales ratio to establishing what the market thinks about the overall health of a company.

As we suspected, our examination of Business-intelligence of Oriental Nations' analyst forecasts revealed that its inferior revenue outlook is contributing to its low P/S. At this stage investors feel the potential for an improvement in revenue isn't great enough to justify a higher P/S ratio. The company will need a change of fortune to justify the P/S rising higher in the future.

The company's balance sheet is another key area for risk analysis. Our free balance sheet analysis for Business-intelligence of Oriental Nations with six simple checks will allow you to discover any risks that could be an issue.

If you're unsure about the strength of Business-intelligence of Oriental Nations' business, why not explore our interactive list of stocks with solid business fundamentals for some other companies you may have missed.

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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.