Jiangsu NandaSoft Technology Company Limited (HKG:8045) Not Doing Enough For Some Investors As Its Shares Slump 32%

Jiangsu NandaSoft Technology Company Limited (HKG:8045) shares have retraced a considerable 32% in the last month, reversing a fair amount of their solid recent performance. Indeed, the recent drop has reduced its annual gain to a relatively sedate 6.7% over the last twelve months.

Since its price has dipped substantially, considering around half the companies operating in Hong Kong's IT industry have price-to-sales ratios (or "P/S") above 1.1x, you may consider Jiangsu NandaSoft Technology as an solid investment opportunity with its 0.3x P/S ratio. However, the P/S might be low for a reason and it requires further investigation to determine if it's justified.

View our latest analysis for Jiangsu NandaSoft Technology

How Has Jiangsu NandaSoft Technology Performed Recently?

For instance, Jiangsu NandaSoft Technology's receding revenue in recent times would have to be some food for thought. Perhaps the market believes the recent revenue performance isn't good enough to keep up the industry, causing the P/S ratio to suffer. If you 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.

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 Jiangsu NandaSoft Technology's earnings, revenue and cash flow.

Is There Any Revenue Growth Forecasted For Jiangsu NandaSoft Technology?

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

Retrospectively, the last year delivered a frustrating 51% decrease to the company's top line. This means it has also seen a slide in revenue over the longer-term as revenue is down 67% in total over the last three years. 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 11% over the next year, which really puts the company's recent medium-term revenue decline into perspective.

With this information, we are not surprised that Jiangsu NandaSoft Technology is trading at a P/S lower than the industry. Nonetheless, there's no guarantee the P/S has reached a floor yet with revenue going in reverse. Even just maintaining these prices could be difficult to achieve as recent revenue trends are already weighing down the shares.

The Final Word

Jiangsu NandaSoft Technology's recently weak share price has pulled its P/S back below other IT companies. While the price-to-sales ratio shouldn't be the defining factor in whether you buy a stock or not, it's quite a capable barometer of revenue expectations.

It's no surprise that Jiangsu NandaSoft Technology maintains its low P/S off the back of its sliding revenue over the medium-term. Right now shareholders are accepting the low P/S as they concede future revenue probably won't provide any pleasant surprises either. Unless the recent medium-term conditions improve, they will continue to form a barrier for the share price around these levels.

Having said that, be aware Jiangsu NandaSoft Technology is showing 2 warning signs in our investment analysis, you should know about.

If strong companies turning a profit tickle your fancy, then you'll want to check out this free list of interesting companies that trade on a low P/E (but have proven they can grow earnings).

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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.