The Market Doesn't Like What It Sees From Anhui Shiny Electronic Technology Company Limited's (SZSE:300956) Revenues Yet As Shares Tumble 33%

The Anhui Shiny Electronic Technology Company Limited (SZSE:300956) share price has softened a substantial 33% over the previous 30 days, handing back much of the gains the stock has made lately. Still, a bad month hasn't completely ruined the past year with the stock gaining 38%, which is great even in a bull market.

Following the heavy fall in price, it would be understandable if you think Anhui Shiny Electronic Technology is a stock with good investment prospects with a price-to-sales ratios (or "P/S") of 2x, considering almost half the companies in China's Tech industry have P/S ratios above 3x. 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 Anhui Shiny Electronic Technology

What Does Anhui Shiny Electronic Technology's Recent Performance Look Like?

Recent times have been quite advantageous for Anhui Shiny Electronic Technology as its revenue has been rising very briskly. One possibility is that the P/S ratio is low because investors think this strong revenue growth might actually underperform the broader industry in the near future. Those who are bullish on Anhui Shiny Electronic Technology will be hoping that this isn't the case, so that they can pick up the stock at a lower valuation.

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 Anhui Shiny Electronic Technology's earnings, revenue and cash flow.

How Is Anhui Shiny Electronic Technology's Revenue Growth Trending?

The only time you'd be truly comfortable seeing a P/S as low as Anhui Shiny Electronic Technology's is when the company's growth is on track to lag the industry.

Retrospectively, the last year delivered an exceptional 31% gain to the company's top line. Still, revenue has fallen 3.0% in total from three years ago, which is quite disappointing. Therefore, it's fair to say the revenue growth recently has been undesirable for the company.

Weighing that medium-term revenue trajectory against the broader industry's one-year forecast for expansion of 19% shows it's an unpleasant look.

With this in mind, we understand why Anhui Shiny Electronic Technology's P/S is lower than most of its industry peers. 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.

The Bottom Line On Anhui Shiny Electronic Technology's P/S

The southerly movements of Anhui Shiny Electronic Technology'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.

Our examination of Anhui Shiny Electronic Technology 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. If recent medium-term revenue trends continue, it's hard to see the share price moving strongly in either direction in the near future under these circumstances.

Don't forget that there may be other risks. For instance, we've identified 3 warning signs for Anhui Shiny Electronic Technology (2 are significant) you should be aware of.

If these risks are making you reconsider your opinion on Anhui Shiny Electronic Technology, 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.

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