Take Care Before Jumping Onto Anhui Wanyi Science and Technology Co.,Ltd. (SHSE:688600) Even Though It's 28% Cheaper

Anhui Wanyi Science and Technology Co.,Ltd. (SHSE:688600) shareholders won't be pleased to see that the share price has had a very rough month, dropping 28% and undoing the prior period's positive performance. Instead of being rewarded, shareholders who have already held through the last twelve months are now sitting on a 33% share price drop.

Following the heavy fall in price, Anhui Wanyi Science and TechnologyLtd may be sending bullish signals at the moment with its price-to-sales (or "P/S") ratio of 2.2x, since 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 are not unusual. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's limited.

See our latest analysis for Anhui Wanyi Science and TechnologyLtd

What Does Anhui Wanyi Science and TechnologyLtd's P/S Mean For Shareholders?

Anhui Wanyi Science and TechnologyLtd could be doing better as its revenue has been going backwards lately while most other companies have been seeing positive revenue growth. The P/S ratio is probably low because investors think this poor revenue performance isn't going to get any better. If this is the case, then existing shareholders will probably struggle to get excited about the future direction of the share price.

Keen to find out how analysts think Anhui Wanyi Science and TechnologyLtd's future stacks up against the industry? In that case, our free report is a great place to start.

How Is Anhui Wanyi Science and TechnologyLtd's Revenue Growth Trending?

There's an inherent assumption that a company should underperform the industry for P/S ratios like Anhui Wanyi Science and TechnologyLtd's to be considered reasonable.

Taking a look back first, we see that there was hardly any revenue growth to speak of for the company over the past year. Still, the latest three year period has seen an excellent 37% overall rise in revenue, in spite of its uninspiring short-term performance. Therefore, it's fair to say the revenue growth recently has been great for the company, but investors will want to ask why it has slowed to such an extent.

Looking ahead now, revenue is anticipated to climb by 30% during the coming year according to the one analyst following the company. That's shaping up to be materially higher than the 26% growth forecast for the broader industry.

With this in consideration, we find it intriguing that Anhui Wanyi Science and TechnologyLtd's P/S sits behind most of its industry peers. It looks like most investors are not convinced at all that the company can achieve future growth expectations.

What We Can Learn From Anhui Wanyi Science and TechnologyLtd's P/S?

The southerly movements of Anhui Wanyi Science and TechnologyLtd's shares means its P/S is now sitting at a pretty low level. 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.

A look at Anhui Wanyi Science and TechnologyLtd's revenues reveals that, despite glowing future growth forecasts, its P/S is much lower than we'd expect. When we see strong growth forecasts like this, we can only assume potential risks are what might be placing significant pressure on the P/S ratio. At least price risks look to be very low, but investors seem to think future revenues could see a lot of volatility.

Don't forget that there may be other risks. For instance, we've identified 1 warning sign for Anhui Wanyi Science and TechnologyLtd that you should be aware of.

It's important to make sure you look for a great company, not just the first idea you come across. So if growing profitability aligns with your idea of a great company, take a peek at this free list of interesting companies with strong recent earnings growth (and a low P/E).

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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.