Market Cool On Future FinTech Group Inc.'s (NASDAQ:FTFT) Revenues Pushing Shares 31% Lower

Unfortunately for some shareholders, the Future FinTech Group Inc. (NASDAQ:FTFT) share price has dived 31% in the last thirty days, prolonging recent pain. For any long-term shareholders, the last month ends a year to forget by locking in a 78% share price decline.

Following the heavy fall in price, Future FinTech Group may look like a strong buying opportunity at present with its price-to-sales (or "P/S") ratio of 0.2x, considering almost half of all companies in the Diversified Financial industry in the United States have P/S ratios greater than 2.7x and even P/S higher than 5x aren't out of the ordinary. However, the P/S might be quite low for a reason and it requires further investigation to determine if it's justified.

View our latest analysis for Future FinTech Group

How Future FinTech Group Has Been Performing

Recent times have been quite advantageous for Future FinTech Group 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. If that doesn't eventuate, then existing shareholders have reason to be quite optimistic about the future direction of the share price.

Want the full picture on earnings, revenue and cash flow for the company? Then our free report on Future FinTech Group will help you shine a light on its historical performance.

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

The only time you'd be truly comfortable seeing a P/S as depressed as Future FinTech Group's is when the company's growth is on track to lag the industry decidedly.

Taking a look back first, we see that the company grew revenue by an impressive 54% last year. The latest three year period has also seen an incredible overall rise in revenue, aided by its incredible short-term performance. So we can start by confirming that the company has done a tremendous job of growing revenue over that time.

Comparing that to the industry, which is only predicted to deliver 4.5% growth in the next 12 months, the company's momentum is stronger based on recent medium-term annualised revenue results.

With this in mind, we find it intriguing that Future FinTech Group's P/S isn't as high compared to that of its industry peers. It looks like most investors are not convinced the company can maintain its recent growth rates.

What We Can Learn From Future FinTech Group's P/S?

Future FinTech Group's P/S looks about as weak as its stock price lately. 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.

We're very surprised to see Future FinTech Group currently trading on a much lower than expected P/S since its recent three-year growth is higher than the wider industry forecast. When we see robust revenue growth that outpaces the industry, we presume that there are notable underlying risks to the company's future performance, which is exerting downward pressure on the P/S ratio. At least price risks look to be very low if recent medium-term revenue trends continue, but investors seem to think future revenue could see a lot of volatility.

It's always necessary to consider the ever-present spectre of investment risk. We've identified 2 warning signs with Future FinTech Group (at least 1 which makes us a bit uncomfortable), and understanding these should be part of your investment process.

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.

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.