There Is A Reason NSFOCUS Technologies Group Co., Ltd.'s (SZSE:300369) Price Is Undemanding

You may think that with a price-to-sales (or "P/S") ratio of 2.4x NSFOCUS Technologies Group Co., Ltd. (SZSE:300369) is definitely a stock worth checking out, seeing as almost half of all the Software companies in China have P/S ratios greater than 4.9x and even P/S above 9x 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 highly reduced P/S.

Check out our latest analysis for NSFOCUS Technologies Group

How Has NSFOCUS Technologies Group Performed Recently?

While the industry has experienced revenue growth lately, NSFOCUS Technologies Group's revenue has gone into reverse gear, which is not great. 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.

If you'd like to see what analysts are forecasting going forward, you should check out our free report on NSFOCUS Technologies Group.

Do Revenue Forecasts Match The Low P/S Ratio?

In order to justify its P/S ratio, NSFOCUS Technologies Group would need to produce anemic growth that's substantially trailing the industry.

Retrospectively, the last year delivered a frustrating 21% decrease to the company's top line. Still, the latest three year period has seen an excellent 40% overall rise in revenue, in spite of its unsatisfying short-term performance. 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 19% during the coming year according to the five analysts following the company. Meanwhile, the rest of the industry is forecast to expand by 33%, which is noticeably more attractive.

With this information, we can see why NSFOCUS Technologies Group 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.

The Bottom Line On NSFOCUS Technologies Group's P/S

Using the price-to-sales ratio alone to determine if you should sell your stock isn't sensible, however it can be a practical guide to the company's future prospects.

We've established that NSFOCUS Technologies 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. Unless these conditions improve, they will continue to form a barrier for the share price around these levels.

Having said that, be aware NSFOCUS Technologies Group is showing 1 warning sign in our investment analysis, you should know about.

If these risks are making you reconsider your opinion on NSFOCUS Technologies Group, 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.