Lacklustre Performance Is Driving Tian Jin Bohai Chemical Co.,Ltd.'s (SHSE:600800) 26% Price Drop

The Tian Jin Bohai Chemical Co.,Ltd. (SHSE:600800) share price has fared very poorly over the last month, falling by a substantial 26%. The drop over the last 30 days has capped off a tough year for shareholders, with the share price down 44% in that time.

Following the heavy fall in price, Tian Jin Bohai ChemicalLtd's price-to-sales (or "P/S") ratio of 0.6x might make it look like a strong buy right now compared to the wider Electronic industry in China, where around half of the companies have P/S ratios above 3.6x and even P/S above 7x are quite common. However, the P/S might be quite low for a reason and it requires further investigation to determine if it's justified.

Check out our latest analysis for Tian Jin Bohai ChemicalLtd

How Tian Jin Bohai ChemicalLtd Has Been Performing

As an illustration, revenue has deteriorated at Tian Jin Bohai ChemicalLtd over the last year, which is not ideal at all. Perhaps the market believes the recent revenue performance isn't good enough to keep up the industry, causing the P/S ratio to suffer. However, if this doesn't eventuate then existing shareholders may be feeling optimistic about the future direction of the share price.

We don't have analyst forecasts, but you can see how recent trends are setting up the company for the future by checking out our free report on Tian Jin Bohai ChemicalLtd's earnings, revenue and cash flow.

Is There Any Revenue Growth Forecasted For Tian Jin Bohai ChemicalLtd?

In order to justify its P/S ratio, Tian Jin Bohai ChemicalLtd would need to produce anemic growth that's substantially trailing the industry.

Retrospectively, the last year delivered a frustrating 30% decrease to the company's top line. Regardless, revenue has managed to lift by a handy 10% in aggregate from three years ago, thanks to the earlier period of growth. Accordingly, while they would have preferred to keep the run going, shareholders would be roughly satisfied with the medium-term rates of revenue growth.

Comparing the recent medium-term revenue trends against the industry's one-year growth forecast of 26% shows it's noticeably less attractive.

In light of this, it's understandable that Tian Jin Bohai ChemicalLtd's P/S sits below the majority of other companies. It seems most investors are expecting to see the recent limited growth rates continue into the future and are only willing to pay a reduced amount for the stock.

What Does Tian Jin Bohai ChemicalLtd's P/S Mean For Investors?

Tian Jin Bohai ChemicalLtd's P/S looks about as weak as its stock price lately. Typically, we'd caution against reading too much into price-to-sales ratios when settling on investment decisions, though it can reveal plenty about what other market participants think about the company.

As we suspected, our examination of Tian Jin Bohai ChemicalLtd revealed its three-year revenue trends are contributing to its low P/S, given they look worse than current industry expectations. 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.

Before you take the next step, you should know about the 1 warning sign for Tian Jin Bohai ChemicalLtd that we have uncovered.

If these risks are making you reconsider your opinion on Tian Jin Bohai ChemicalLtd, 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.