Jianzhi Education Technology Group Company Limited (NASDAQ:JZ) shareholders that were waiting for something to happen have been dealt a blow with a 42% share price drop in the last month. For any long-term shareholders, the last month ends a year to forget by locking in a 60% share price decline.

After such a large drop in price, when close to half the companies operating in the United States' Consumer Services industry have price-to-sales ratios (or "P/S") above 1.5x, you may consider Jianzhi Education Technology Group as an enticing stock to check out 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 Has Jianzhi Education Technology Group Performed Recently?

For example, consider that Jianzhi Education Technology Group's financial performance has been poor lately as its revenue has been in decline. One possibility is that the P/S is low because investors think the company won't do enough to avoid underperforming the broader industry in the near future. However, if this doesn't eventuate then existing shareholders may be feeling optimistic about the future direction of the share price.

Is There Any Revenue Growth Forecasted For Jianzhi Education Technology Group?

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

Retrospectively, the last year delivered a frustrating 13% decrease to the company's top line. That put a dampener on the good run it was having over the longer-term as its three-year revenue growth is still a noteworthy 8.8% in total. Accordingly, while they would have preferred to keep the run going, shareholders would be roughly satisfied with the medium-term rates of revenue growth.

This is in contrast to the rest of the industry, which is expected to grow by 15% over the next year, materially higher than the company's recent medium-term annualised growth rates.

In light of this, it's understandable that Jianzhi Education Technology Group's P/S sits below the majority of other companies. Apparently many shareholders weren't comfortable holding on to something they believe will continue to trail the wider industry.

The Bottom Line On Jianzhi Education Technology Group's P/S

Jianzhi Education Technology Group's recently weak share price has pulled its P/S back below other Consumer Services companies. 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.

As we suspected, our examination of Jianzhi Education Technology Group revealed its three-year revenue trends are contributing to its low P/S, given they look worse than current industry expectations. At this stage investors feel the potential for an improvement in revenue isn't great enough to justify a higher P/S ratio. Unless the recent medium-term conditions improve, they will continue to form a barrier for the share price around these levels.

Having said that, be aware Jianzhi Education Technology Group is showing 4 warning signs in our investment analysis, and 3 of those can't be ignored.

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.

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