Lacklustre Performance Is Driving Shanghai Amarsoft Information & Technology Co.,Ltd's (SZSE:300380) Low P/S

Shanghai Amarsoft Information & Technology Co.,Ltd's (SZSE:300380) price-to-sales (or "P/S") ratio of 3.1x might 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 5.1x and even P/S above 9x are quite common. However, the P/S might be low for a reason and it requires further investigation to determine if it's justified.

View our latest analysis for Shanghai Amarsoft Information & TechnologyLtd

How Shanghai Amarsoft Information & TechnologyLtd Has Been Performing

It looks like revenue growth has deserted Shanghai Amarsoft Information & TechnologyLtd recently, which is not something to boast about. One possibility is that the P/S is low because investors think this benign revenue growth rate will likely underperform the broader industry in the near future. Those who are bullish on Shanghai Amarsoft Information & TechnologyLtd will be hoping that this isn't the case, so that they can pick up the stock at a lower valuation.

Want the full picture on earnings, revenue and cash flow for the company? Then our free report on Shanghai Amarsoft Information & TechnologyLtd will help you shine a light on its historical performance.

Do Revenue Forecasts Match The Low P/S Ratio?

Shanghai Amarsoft Information & TechnologyLtd'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.

Taking a look back first, we see that there was hardly any revenue growth to speak of for the company over the past year. Regardless, revenue has managed to lift by a handy 25% in aggregate from three years ago, thanks to the earlier period of growth. So it appears to us that the company has had a mixed result in terms of growing revenue over that time.

Comparing that to the industry, which is predicted to deliver 34% growth in the next 12 months, the company's momentum is weaker, based on recent medium-term annualised revenue results.

With this information, we can see why Shanghai Amarsoft Information & TechnologyLtd is trading at a P/S lower than the industry. Apparently many shareholders weren't comfortable holding on to something they believe will continue to trail the wider industry.

The Bottom Line On Shanghai Amarsoft Information & TechnologyLtd's P/S

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.

In line with expectations, Shanghai Amarsoft Information & TechnologyLtd maintains its low P/S on the weakness of its recent three-year growth being lower than the wider industry forecast. Right now shareholders are accepting the low P/S as they concede future revenue probably won't provide any pleasant surprises. Unless the recent medium-term conditions improve, they will continue to form a barrier for the share price around these levels.

It is also worth noting that we have found 3 warning signs for Shanghai Amarsoft Information & TechnologyLtd that you need to take into consideration.

If these risks are making you reconsider your opinion on Shanghai Amarsoft Information & TechnologyLtd, 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.