SINOPEC Shandong Taishan Pectroleum Co., Ltd. (SZSE:000554) shareholders that were waiting for something to happen have been dealt a blow with a 25% 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 19% in that time.

Although its price has dipped substantially, when close to half the companies operating in China's Oil and Gas industry have price-to-sales ratios (or "P/S") above 1.2x, you may still consider SINOPEC Shandong Taishan Pectroleum as an enticing stock to check out with its 0.7x 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 SINOPEC Shandong Taishan Pectroleum Has Been Performing

For instance, SINOPEC Shandong Taishan Pectroleum'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.

Is There Any Revenue Growth Forecasted For SINOPEC Shandong Taishan Pectroleum?

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

In reviewing the last year of financials, we were disheartened to see the company's revenues fell to the tune of 1.5%. Still, the latest three year period has seen an excellent 39% overall rise in revenue, in spite of its unsatisfying short-term performance. Accordingly, while they would have preferred to keep the run going, shareholders would definitely welcome the medium-term rates of revenue growth.

When compared to the industry's one-year growth forecast of 2.6%, the most recent medium-term revenue trajectory is noticeably more alluring

With this in mind, we find it intriguing that SINOPEC Shandong Taishan Pectroleum'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.

The Key Takeaway

SINOPEC Shandong Taishan Pectroleum's recently weak share price has pulled its P/S back below other Oil and Gas companies. It's argued the price-to-sales ratio is an inferior measure of value within certain industries, but it can be a powerful business sentiment indicator.

Our examination of SINOPEC Shandong Taishan Pectroleum revealed its three-year revenue trends aren't boosting its P/S anywhere near as much as we would have predicted, given they look better than current industry expectations. 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. While recent revenue trends over the past medium-term suggest that the risk of a price decline is low, investors appear to perceive a likelihood of revenue fluctuations in the future.

And what about other risks? Every company has them, and we've spotted 1 warning sign for SINOPEC Shandong Taishan Pectroleum you should know about.

If these risks are making you reconsider your opinion on SINOPEC Shandong Taishan Pectroleum, 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.