Shanghai Electric Wind Power Group Co., Ltd. (SHSE:688660) shareholders that were waiting for something to happen have been dealt a blow with a 28% share price drop in the last month. The drop over the last 30 days has capped off a tough year for shareholders, with the share price down 43% in that time.

After such a large drop in price, given about half the companies operating in China's Electrical industry have price-to-sales ratios (or "P/S") above 2x, you may consider Shanghai Electric Wind Power Group as an attractive investment with its 0.4x P/S ratio. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the reduced P/S.

How Shanghai Electric Wind Power Group Has Been Performing

Revenue has risen at a steady rate over the last year for Shanghai Electric Wind Power Group, which is generally not a bad outcome. It might be that many expect the respectable revenue performance to degrade, which has repressed the P/S. Those who are bullish on Shanghai Electric Wind Power Group will be hoping that this isn't the case, so that they can pick up the stock at a lower valuation.

Is There Any Revenue Growth Forecasted For Shanghai Electric Wind Power Group?

The only time you'd be truly comfortable seeing a P/S as low as Shanghai Electric Wind Power Group's is when the company's growth is on track to lag the industry.

Taking a look back first, we see that the company managed to grow revenues by a handy 5.6% last year. Still, lamentably revenue has fallen 45% in aggregate from three years ago, which is disappointing. 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 27% growth in the next 12 months, the company's downward momentum based on recent medium-term revenue results is a sobering picture.

With this in mind, we understand why Shanghai Electric Wind Power Group's P/S is lower than most of its industry peers. 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 Bottom Line On Shanghai Electric Wind Power Group's P/S

Shanghai Electric Wind Power Group's recently weak share price has pulled its P/S back below other Electrical companies. Generally, our preference is to limit the use of the price-to-sales ratio to establishing what the market thinks about the overall health of a company.

It's no surprise that Shanghai Electric Wind Power Group maintains its low P/S off the back of its sliding revenue over the medium-term. 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.

Before you take the next step, you should know about the 1 warning sign for Shanghai Electric Wind Power Group that we have uncovered.

If these risks are making you reconsider your opinion on Shanghai Electric Wind Power Group, 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.