The Market Doesn't Like What It Sees From RAISECOM TECHNOLOGY CO.,Ltd.'s (SHSE:603803) Revenues Yet As Shares Tumble 27%

RAISECOM TECHNOLOGY CO.,Ltd. (SHSE:603803) shares have retraced a considerable 27% in the last month, reversing a fair amount of their solid recent performance. Still, a bad month hasn't completely ruined the past year with the stock gaining 29%, which is great even in a bull market.

Following the heavy fall in price, RAISECOM TECHNOLOGYLtd's price-to-sales (or "P/S") ratio of 2.7x might make it look like a buy right now compared to the Communications industry in China, where around half of the companies have P/S ratios above 4.9x and even P/S above 9x are quite common. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's limited.

Check out our latest analysis for RAISECOM TECHNOLOGYLtd

What Does RAISECOM TECHNOLOGYLtd's Recent Performance Look Like?

As an illustration, revenue has deteriorated at RAISECOM TECHNOLOGYLtd over the last year, which is not ideal at all. It might be that many expect the disappointing revenue performance to continue or accelerate, which has repressed the P/S. Those who are bullish on RAISECOM 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 RAISECOM TECHNOLOGYLtd will help you shine a light on its historical performance.

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

In order to justify its P/S ratio, RAISECOM TECHNOLOGYLtd would need to produce sluggish growth that's trailing the industry.

In reviewing the last year of financials, we were disheartened to see the company's revenues fell to the tune of 17%. The last three years don't look nice either as the company has shrunk revenue by 19% in aggregate. 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 36% over the next year, which really puts the company's recent medium-term revenue decline into perspective.

In light of this, it's understandable that RAISECOM TECHNOLOGYLtd's P/S would sit below the majority of other companies. Nonetheless, there's no guarantee the P/S has reached a floor yet with revenue going in reverse. There's potential for the P/S to fall to even lower levels if the company doesn't improve its top-line growth.

What Does RAISECOM TECHNOLOGYLtd's P/S Mean For Investors?

RAISECOM TECHNOLOGYLtd's P/S has taken a dip along with its share price. We'd say the price-to-sales ratio's power isn't primarily as a valuation instrument but rather to gauge current investor sentiment and future expectations.

It's no surprise that RAISECOM TECHNOLOGYLtd maintains its low P/S off the back of its sliding revenue over the medium-term. At this stage investors feel the potential for an improvement in revenue isn't great enough to justify a higher P/S ratio. 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 2 warning signs for RAISECOM TECHNOLOGYLtd that you need to take into consideration.

If you're unsure about the strength of RAISECOM TECHNOLOGYLtd'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.