Little Excitement Around CCSC Technology International Holdings Limited's (NASDAQ:CCTG) Revenues As Shares Take 26% Pounding

The CCSC Technology International Holdings Limited (NASDAQ:CCTG) share price has softened a substantial 26% over the previous 30 days, handing back much of the gains the stock has made lately. To make matters worse, the recent drop has wiped out a year's worth of gains with the share price now back where it started a year ago.

Following the heavy fall in price, CCSC Technology International Holdings may be sending bullish signals at the moment with its price-to-sales (or "P/S") ratio of 1.4x, since almost half of all companies in the Electronic industry in the United States have P/S ratios greater than 2x and even P/S higher than 5x 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 CCSC Technology International Holdings

How Has CCSC Technology International Holdings Performed Recently?

As an illustration, revenue has deteriorated at CCSC Technology International Holdings over the last year, which is not ideal at all. It might be that many expect the disappointing revenue performance to continue or accelerate, which has repressed the P/S. However, if this doesn't eventuate then existing shareholders may be feeling 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 CCSC Technology International Holdings will help you shine a light on its historical performance.

How Is CCSC Technology International Holdings' Revenue Growth Trending?

In order to justify its P/S ratio, CCSC Technology International Holdings would need to produce sluggish growth that's trailing the industry.

Retrospectively, the last year delivered a frustrating 39% decrease to the company's top line. As a result, revenue from three years ago have also fallen 35% overall. So unfortunately, we have to acknowledge that the company has not done a great job of growing revenue over that time.

Comparing that to the industry, which is predicted to deliver 9.4% growth in the next 12 months, the company's downward momentum based on recent medium-term revenue results is a sobering picture.

With this information, we are not surprised that CCSC Technology International Holdings is trading at a P/S lower than the industry. 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. Even just maintaining these prices could be difficult to achieve as recent revenue trends are already weighing down the shares.

What Does CCSC Technology International Holdings' P/S Mean For Investors?

CCSC Technology International Holdings' recently weak share price has pulled its P/S back below other Electronic companies. Using the price-to-sales ratio alone to determine if you should sell your stock isn't sensible, however it can be a practical guide to the company's future prospects.

Our examination of CCSC Technology International Holdings 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.

You need to take note of risks, for example - CCSC Technology International Holdings has 3 warning signs (and 2 which are potentially serious) we think you should know about.

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

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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.