Nano Labs Ltd (NASDAQ:NA) shares have had a horrible month, losing 64% after a relatively good period beforehand. 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.

Even after such a large drop in price, you could still be forgiven for feeling indifferent about Nano Labs' P/S ratio of 3.9x, since the median price-to-sales (or "P/S") ratio for the Semiconductor industry in the United States is also close to 4.4x. However, investors might be overlooking a clear opportunity or potential setback if there is no rational basis for the P/S.

How Has Nano Labs Performed Recently?

For instance, Nano Labs' receding revenue in recent times would have to be some food for thought. Perhaps investors believe the recent revenue performance is enough to keep in line with the industry, which is keeping the P/S from dropping off. If not, then existing shareholders may be a little nervous about the viability of the share price.

Although there are no analyst estimates available for Nano Labs, take a look at this free data-rich visualisation to see how the company stacks up on earnings, revenue and cash flow.

How Is Nano Labs' Revenue Growth Trending?

Nano Labs' P/S ratio would be typical for a company that's only expected to deliver moderate growth, and importantly, perform in line with the industry.

Taking a look back first, the company's revenue growth last year wasn't something to get excited about as it posted a disappointing decline of 92%. The latest three year period has seen an incredible overall rise in revenue, a stark contrast to the last 12 months. Therefore, it's fair to say the revenue growth recently has been superb for the company, but investors will want to ask why it is now in decline.

This is in contrast to the rest of the industry, which is expected to grow by 46% over the next year, materially lower than the company's recent medium-term annualised growth rates.

In light of this, it's curious that Nano Labs' P/S sits in line with the majority of other companies. Apparently some shareholders believe the recent performance is at its limits and have been accepting lower selling prices.

What Does Nano Labs' P/S Mean For Investors?

Following Nano Labs' share price tumble, its P/S is just clinging on to the industry median P/S. 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.

We didn't quite envision Nano Labs' P/S sitting in line with the wider industry, considering the revenue growth over the last three-year is higher than the current industry outlook. When we see strong revenue with faster-than-industry growth, we can only assume potential risks are what might be placing pressure on the P/S ratio. It appears some are indeed anticipating revenue instability, because the persistence of these recent medium-term conditions would normally provide a boost to the share price.

Before you settle on your opinion, we've discovered 4 warning signs for Nano Labs (3 are potentially serious!) that you should be aware of.

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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