Positive Sentiment Still Eludes Unionman Technology Co.,Ltd. (SHSE:688609) Following 33% Share Price Slump

The Unionman Technology Co.,Ltd. (SHSE:688609) share price has fared very poorly over the last month, falling by a substantial 33%. The recent drop has obliterated the annual return, with the share price now down 5.9% over that longer period.

After such a large drop in price, Unionman TechnologyLtd may be sending bullish signals at the moment with its price-to-sales (or "P/S") ratio of 2x, since almost half of all companies in the Communications industry in China have P/S ratios greater than 3.8x and even P/S higher than 7x are not unusual. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the reduced P/S.

Check out our latest analysis for Unionman TechnologyLtd

How Has Unionman TechnologyLtd Performed Recently?

While the industry has experienced revenue growth lately, Unionman TechnologyLtd's revenue has gone into reverse gear, which is not great. The P/S ratio is probably low because investors think this poor revenue performance isn't going to get any better. If you still like the company, you'd be hoping this isn't the case so that you could potentially pick up some stock while it's out of favour.

Want the full picture on analyst estimates for the company? Then our free report on Unionman TechnologyLtd will help you uncover what's on the horizon.

Do Revenue Forecasts Match The Low P/S Ratio?

In order to justify its P/S ratio, Unionman 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 9.7%. This has soured the latest three-year period, which nevertheless managed to deliver a decent 7.0% overall rise in revenue. Although it's been a bumpy ride, it's still fair to say the revenue growth recently has been mostly respectable for the company.

Looking ahead now, revenue is anticipated to climb by 94% during the coming year according to the one analyst following the company. With the industry only predicted to deliver 50%, the company is positioned for a stronger revenue result.

With this in consideration, we find it intriguing that Unionman TechnologyLtd's P/S sits behind most of its industry peers. Apparently some shareholders are doubtful of the forecasts and have been accepting significantly lower selling prices.

The Final Word

Unionman TechnologyLtd's P/S has taken a dip along with its share price. 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.

Unionman TechnologyLtd's analyst forecasts revealed that its superior revenue outlook isn't contributing to its P/S anywhere near as much as we would have predicted. 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. It appears the market could be anticipating revenue instability, because these conditions should normally provide a boost to the share price.

It is also worth noting that we have found 2 warning signs for Unionman TechnologyLtd that you need to take into consideration.

If you're unsure about the strength of Unionman TechnologyLtd's business, why not explore our interactive list of stocks with solid business fundamentals for some other companies you may have missed.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.