Revenues Working Against Cetc Potevio Science&Technology Co.,Ltd.'s (SZSE:002544) Share Price

With a price-to-sales (or "P/S") ratio of 2.4x Cetc Potevio Science&Technology Co.,Ltd. (SZSE:002544) may be sending bullish signals at the moment, given that almost half of all the Communications companies in China have P/S ratios greater than 3.8x and even P/S higher than 7x 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 Cetc Potevio Science&TechnologyLtd

How Has Cetc Potevio Science&TechnologyLtd Performed Recently?

Cetc Potevio Science&TechnologyLtd hasn't been tracking well recently as its declining revenue compares poorly to other companies, which have seen some growth in their revenues on average. It seems that many are expecting the poor revenue performance to persist, which has repressed the P/S ratio. If this is the case, then existing shareholders will probably struggle to get excited about the future direction of the share price.

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

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

In order to justify its P/S ratio, Cetc Potevio Science&TechnologyLtd would need to produce sluggish growth that's trailing the industry.

Retrospectively, the last year delivered a frustrating 25% decrease to the company's top line. As a result, revenue from three years ago have also fallen 21% overall. Accordingly, shareholders would have felt downbeat about the medium-term rates of revenue growth.

Shifting to the future, estimates from the two analysts covering the company suggest revenue should grow by 28% over the next year. With the industry predicted to deliver 48% growth, the company is positioned for a weaker revenue result.

With this in consideration, its clear as to why Cetc Potevio Science&TechnologyLtd's P/S is falling short industry peers. Apparently many shareholders weren't comfortable holding on while the company is potentially eyeing a less prosperous future.

The Bottom Line On Cetc Potevio Science&TechnologyLtd's P/S

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 expected, our analysis of Cetc Potevio Science&TechnologyLtd's analyst forecasts confirms that the company's underwhelming revenue outlook is a major contributor to its low P/S. Shareholders' pessimism on the revenue prospects for the company seems to be the main contributor to the depressed P/S. The company will need a change of fortune to justify the P/S rising higher in the future.

Having said that, be aware Cetc Potevio Science&TechnologyLtd is showing 2 warning signs in our investment analysis, you should know about.

If companies with solid past earnings growth is up your alley, you may wish to see this free collection of other companies with strong earnings growth and low P/E ratios.

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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.

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