Not Many Are Piling Into Viomi Technology Co., Ltd (NASDAQ:VIOT) Stock Yet As It Plummets 27%

The Viomi Technology Co., Ltd (NASDAQ:VIOT) share price has fared very poorly over the last month, falling by a substantial 27%. Looking at the bigger picture, even after this poor month the stock is up 67% in the last year.

Even after such a large drop in price, it's still not a stretch to say that Viomi Technology's price-to-sales (or "P/S") ratio of 0.4x right now seems quite "middle-of-the-road" compared to the Consumer Durables industry in the United States, where the median P/S ratio is around 0.6x. Although, it's not wise to simply ignore the P/S without explanation as investors may be disregarding a distinct opportunity or a costly mistake.

AI is about to change healthcare. These 20 stocks are working on everything from early diagnostics to drug discovery. The best part - they are all under $10bn in marketcap - there is still time to get in early.

See our latest analysis for Viomi Technology

How Has Viomi Technology Performed Recently?

With revenue growth that's superior to most other companies of late, Viomi Technology has been doing relatively well. One possibility is that the P/S ratio is moderate because investors think this strong revenue performance might be about to tail off. If the company manages to stay the course, then investors should be rewarded with a share price that matches its revenue figures.

Want the full picture on analyst estimates for the company? Then our free report on Viomi Technology will help you uncover what's on the horizon.

Is There Some Revenue Growth Forecasted For Viomi Technology?

There's an inherent assumption that a company should be matching the industry for P/S ratios like Viomi Technology's to be considered reasonable.

Taking a look back first, we see that the company grew revenue by an impressive 24% last year. However, this wasn't enough as the latest three year period has seen the company endure a nasty 31% drop in revenue in aggregate. Accordingly, shareholders would have felt downbeat about the medium-term rates of revenue growth.

Shifting to the future, estimates from the only analyst covering the company suggest revenue should grow by 7.5% over the next year. That's shaping up to be materially higher than the 1.9% growth forecast for the broader industry.

With this in consideration, we find it intriguing that Viomi Technology's P/S is closely matching its industry peers. It may be that most investors aren't convinced the company can achieve future growth expectations.

What We Can Learn From Viomi Technology's P/S?

Viomi Technology's plummeting stock price has brought its P/S back to a similar region as the rest of the industry. While the price-to-sales ratio shouldn't be the defining factor in whether you buy a stock or not, it's quite a capable barometer of revenue expectations.

We've established that Viomi Technology currently trades on a lower than expected P/S since its forecasted revenue growth is higher than the wider industry. When we see a strong revenue outlook, with growth outpacing the industry, we can only assume potential uncertainty around these figures are what might be placing slight pressure on the P/S ratio. At least the risk of a price drop looks to be subdued, but investors seem to think future revenue could see some volatility.

There are also other vital risk factors to consider before investing and we've discovered 1 warning sign for Viomi Technology that you should be aware of.

If you're unsure about the strength of Viomi Technology's business, why not explore our interactive list of stocks with solid business fundamentals for some other companies you may have missed.