Kunshan Kersen Science & Technology Co.,Ltd. (SHSE:603626) Not Doing Enough For Some Investors As Its Shares Slump 30%

Kunshan Kersen Science & Technology Co.,Ltd. (SHSE:603626) shareholders won't be pleased to see that the share price has had a very rough month, dropping 30% and undoing the prior period's positive performance. Longer-term shareholders would now have taken a real hit with the stock declining 7.0% in the last year.

Since its price has dipped substantially, Kunshan Kersen Science & TechnologyLtd may look like a strong buying opportunity at present with its price-to-sales (or "P/S") ratio of 1.2x, considering almost half of all companies in the Electronic industry in China have P/S ratios greater than 3.9x and even P/S higher than 8x aren't out of the ordinary. 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 Kunshan Kersen Science & TechnologyLtd

What Does Kunshan Kersen Science & TechnologyLtd's Recent Performance Look Like?

Revenue has risen firmly for Kunshan Kersen Science & TechnologyLtd recently, which is pleasing to see. One possibility is that the P/S is low because investors think this respectable revenue growth might actually underperform the broader industry in the near future. If that doesn't eventuate, then existing shareholders have reason to be 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 Kunshan Kersen Science & TechnologyLtd's earnings, revenue and cash flow.

Is There Any Revenue Growth Forecasted For Kunshan Kersen Science & TechnologyLtd?

In order to justify its P/S ratio, Kunshan Kersen Science & TechnologyLtd would need to produce anemic growth that's substantially trailing the industry.

If we review the last year of revenue growth, the company posted a terrific increase of 16%. Despite this strong recent growth, it's still struggling to catch up as its three-year revenue frustratingly shrank by 9.9% overall. Accordingly, shareholders would have felt downbeat about the medium-term rates of revenue growth.

In contrast to the company, the rest of the industry is expected to grow by 26% over the next year, which really puts the company's recent medium-term revenue decline into perspective.

With this information, we are not surprised that Kunshan Kersen Science & TechnologyLtd is trading at a P/S lower than the industry. However, we think shrinking revenues are unlikely to lead to a stable P/S over the longer term, which could set up shareholders for future disappointment. There's potential for the P/S to fall to even lower levels if the company doesn't improve its top-line growth.

What We Can Learn From Kunshan Kersen Science & TechnologyLtd's P/S?

Kunshan Kersen Science & TechnologyLtd's P/S looks about as weak as its stock price lately. 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.

Our examination of Kunshan Kersen Science & TechnologyLtd confirms that the company's shrinking revenue over the past medium-term is a key factor in its low price-to-sales ratio, given the industry is projected to grow. At this stage investors feel the potential for an improvement in revenue isn't great enough to justify a higher P/S ratio. Given the current circumstances, it seems unlikely that the share price will experience any significant movement in either direction in the near future if recent medium-term revenue trends persist.

Plus, you should also learn about these 4 warning signs we've spotted with Kunshan Kersen Science & TechnologyLtd (including 2 which are concerning).

If these risks are making you reconsider your opinion on Kunshan Kersen Science & 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.