AVCON Information Technology Co., Ltd. (SZSE:300074) shareholders that were waiting for something to happen have been dealt a blow with a 29% share price drop in the last month. Instead of being rewarded, shareholders who have already held through the last twelve months are now sitting on a 21% share price drop.
In spite of the heavy fall in price, it's still not a stretch to say that AVCON Information Technology's price-to-sales (or "P/S") ratio of 3.9x right now seems quite "middle-of-the-road" compared to the Communications industry in China, where the median P/S ratio is around 4x. 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.
How Has AVCON Information Technology Performed Recently?
For example, consider that AVCON Information Technology's financial performance has been poor lately as its revenue has been in decline. It might be that many expect the company to put the disappointing revenue performance behind them over the coming period, which has kept the P/S from falling. If you like the company, you'd at least be hoping this is the case so that you could potentially pick up some stock while it's not quite in favour.
Want the full picture on earnings, revenue and cash flow for the company? Then our free report on AVCON Information Technology will help you shine a light on its historical performance.
How Is AVCON Information Technology's Revenue Growth Trending?
AVCON Information Technology's 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.
Retrospectively, the last year delivered a frustrating 7.8% decrease to the company's top line. The last three years don't look nice either as the company has shrunk revenue by 9.4% in aggregate. So unfortunately, we have to acknowledge that the company has not done a great job of growing revenue over that time.
Comparing that to the industry, which is predicted to deliver 45% growth in the next 12 months, the company's downward momentum based on recent medium-term revenue results is a sobering picture.
With this information, we find it concerning that AVCON Information Technology is trading at a fairly similar P/S compared to the industry. Apparently many investors in the company are way less bearish than recent times would indicate and aren't willing to let go of their stock right now. There's a good chance existing shareholders are setting themselves up for future disappointment if the P/S falls to levels more in line with the recent negative growth rates.
What Does AVCON Information Technology's P/S Mean For Investors?
With its share price dropping off a cliff, the P/S for AVCON Information Technology looks to be in line with the rest of the Communications industry. 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 look at AVCON Information Technology revealed its shrinking revenues over the medium-term haven't impacted the P/S as much as we anticipated, given the industry is set to grow. When we see revenue heading backwards in the context of growing industry forecasts, it'd make sense to expect a possible share price decline on the horizon, sending the moderate P/S lower. Unless the the circumstances surrounding the recent medium-term improve, it wouldn't be wrong to expect a a difficult period ahead for the company's shareholders.
Having said that, be aware AVCON Information Technology is showing 1 warning sign in our investment analysis, you should know about.
Of course, profitable companies with a history of great earnings growth are generally safer bets. So you may wish to see this free collection of other companies that have reasonable P/E ratios and have grown earnings strongly.
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尽管价格大幅下跌,但与中国通信行业相比,AVCON Information Technology目前3.9倍的市销率(或 “市销率”)似乎相当 “处于中间位置”,后者的市销率中位数约为4倍,这仍然不费吹灰之力。但是,不加解释地忽略市销率是不明智的,因为投资者可能会忽视一个明显的机会或一个代价高昂的错误。