To the annoyance of some shareholders, B-SOFT Co.,Ltd. (SZSE:300451) shares are down a considerable 28% in the last month, which continues a horrid run for the company. For any long-term shareholders, the last month ends a year to forget by locking in a 54% share price decline.

After such a large drop in price, when close to half the companies operating in China's Healthcare Services industry have price-to-sales ratios (or "P/S") above 6.6x, you may consider B-SOFTLtd as an enticing stock to check out with its 4.2x 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.

What Does B-SOFTLtd's P/S Mean For Shareholders?

While the industry has experienced revenue growth lately, B-SOFTLtd's revenue has gone into reverse gear, which is not great. Perhaps the P/S remains low as investors think the prospects of strong revenue growth aren't on the horizon. So while you could say the stock is cheap, investors will be looking for improvement before they see it as good value.

How Is B-SOFTLtd's Revenue Growth Trending?

B-SOFTLtd's P/S ratio would be typical for a company that's only expected to deliver limited growth, and importantly, perform worse than the industry.

Retrospectively, the last year delivered a frustrating 15% decrease to the company's top line. The last three years don't look nice either as the company has shrunk revenue by 6.6% in aggregate. Accordingly, shareholders would have felt downbeat about the medium-term rates of revenue growth.

Looking ahead now, revenue is anticipated to climb by 33% during the coming year according to the five analysts following the company. That's shaping up to be similar to the 36% growth forecast for the broader industry.

In light of this, it's peculiar that B-SOFTLtd's P/S sits below the majority of other companies. Apparently some shareholders are doubtful of the forecasts and have been accepting lower selling prices.

The Final Word

The southerly movements of B-SOFTLtd'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 B-SOFTLtd's revealed that its P/S remains low despite analyst forecasts of revenue growth matching the wider industry. The low P/S could be an indication that the revenue growth estimates are being questioned by the market. At least the risk of a price drop looks to be subdued, but investors seem to think future revenue could see some volatility.

A lot of potential risks can sit within a company's balance sheet. Our free balance sheet analysis for B-SOFTLtd with six simple checks will allow you to discover any risks that could be an issue.

If you're unsure about the strength of B-SOFTLtd's 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.