Beijing Thunisoft Co., Ltd.'s (SZSE:300271) Shares Bounce 26% But Its Business Still Trails The Industry

Beijing Thunisoft Co., Ltd. (SZSE:300271) shareholders are no doubt pleased to see that the share price has bounced 26% in the last month, although it is still struggling to make up recently lost ground. Not all shareholders will be feeling jubilant, since the share price is still down a very disappointing 30% in the last twelve months.

In spite of the firm bounce in price, Beijing Thunisoft's price-to-sales (or "P/S") ratio of 2.9x might still make it look like a buy right now compared to the Software industry in China, where around half of the companies have P/S ratios above 5.3x and even P/S above 9x are quite common. 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 Beijing Thunisoft

How Has Beijing Thunisoft Performed Recently?

Beijing Thunisoft 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. Perhaps the P/S remains low as investors think the prospects of strong revenue growth aren't on the horizon. 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 Thunisoft.

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

Beijing Thunisoft's P/S ratio would be typical for a company that's only expected to deliver limited growth, and importantly, perform worse than the industry.

Retrospectively, the last year delivered a frustrating 51% decrease to the company's top line. The last three years don't look nice either as the company has shrunk revenue by 34% in aggregate. So unfortunately, we have to acknowledge that the company has not done a great job of growing revenue over that time.

Shifting to the future, estimates from the two analysts covering the company suggest revenue should grow by 21% over the next year. Meanwhile, the rest of the industry is forecast to expand by 33%, which is noticeably more attractive.

With this information, we can see why Beijing Thunisoft is trading at a P/S lower than the industry. Apparently many shareholders weren't comfortable holding on while the company is potentially eyeing a less prosperous future.

What We Can Learn From Beijing Thunisoft's P/S?

Despite Beijing Thunisoft's share price climbing recently, its P/S still lags most other companies. 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.

As we suspected, our examination of Beijing Thunisoft's analyst forecasts revealed that its inferior revenue outlook is contributing to its low P/S. Shareholders' pessimism on the revenue prospects for the company seems to be the main contributor to the depressed P/S. The company will need a change of fortune to justify the P/S rising higher in the future.

Plus, you should also learn about this 1 warning sign we've spotted with Beijing Thunisoft.

If you're unsure about the strength of Beijing Thunisoft's 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.