Those holding Fsilon Furnishing and Construction Materials Corporation (SHSE:605318) shares would be relieved that the share price has rebounded 26% in the last thirty days, but it needs to keep going to repair the recent damage it has caused to investor portfolios. Taking a wider view, although not as strong as the last month, the full year gain of 14% is also fairly reasonable.
Since its price has surged higher, you could be forgiven for thinking Fsilon Furnishing and Construction Materials is a stock not worth researching with a price-to-sales ratios (or "P/S") of 3.2x, considering almost half the companies in China's Consumer Durables industry have P/S ratios below 1.8x. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's as high as it is.
SHSE:605318 Price to Sales Ratio vs Industry February 21st 2024
What Does Fsilon Furnishing and Construction Materials' Recent Performance Look Like?
As an illustration, revenue has deteriorated at Fsilon Furnishing and Construction Materials over the last year, which is not ideal at all. Perhaps the market believes the company can do enough to outperform the rest of the industry in the near future, which is keeping the P/S ratio high. You'd really hope so, otherwise you're paying a pretty hefty price for no particular reason.
We don't have analyst forecasts, but you can see how recent trends are setting up the company for the future by checking out our free report on Fsilon Furnishing and Construction Materials' earnings, revenue and cash flow.
What Are Revenue Growth Metrics Telling Us About The High P/S?
In order to justify its P/S ratio, Fsilon Furnishing and Construction Materials would need to produce impressive growth in excess of 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 6.9%. However, a few very strong years before that means that it was still able to grow revenue by an impressive 48% in total over the last three years. Accordingly, while they would have preferred to keep the run going, shareholders would definitely welcome the medium-term rates of revenue growth.
Comparing that to the industry, which is predicted to deliver 12% growth in the next 12 months, the company's momentum is pretty similar based on recent medium-term annualised revenue results.
In light of this, it's curious that Fsilon Furnishing and Construction Materials' P/S sits above the majority of other companies. It seems most investors are ignoring the fairly average recent growth rates and are willing to pay up for exposure to the stock. Nevertheless, they may be setting themselves up for future disappointment if the P/S falls to levels more in line with recent growth rates.
The Bottom Line On Fsilon Furnishing and Construction Materials' P/S
Fsilon Furnishing and Construction Materials shares have taken a big step in a northerly direction, but its P/S is elevated as a result. We'd say the price-to-sales ratio's power isn't primarily as a valuation instrument but rather to gauge current investor sentiment and future expectations.
Our examination of Fsilon Furnishing and Construction Materials revealed its three-year revenue trends aren't impacting its high P/S as much as we would have predicted, given they look similar to current industry expectations. When we see average revenue with industry-like growth combined with a high P/S, we suspect the share price is at risk of declining, bringing the P/S back in line with the industry too. If recent medium-term revenue trends continue, it will place shareholders' investments at risk and potential investors in danger of paying an unnecessary premium.
Having said that, be aware Fsilon Furnishing and Construction Materials is showing 3 warning signs in our investment analysis, and 2 of those are a bit unpleasant.
If these risks are making you reconsider your opinion on Fsilon Furnishing and Construction Materials, explore our interactive list of high quality stocks to get an idea of what else is out there.
Have feedback on this article? Concerned about the content?Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com. 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.
那些持有Fsilon Furnishing and Corporation(SHSE: 605318)股票的人会松一口气,因为股价在过去三十天中反弹了26%,但它需要继续修复最近对投资者投资组合造成的损失。从更广泛的角度来看,尽管没有上个月那么强劲,但全年14%的涨幅也相当合理。
我们对Fsilon Furnishing and Construction Materials的审查显示,鉴于其三年收入趋势与当前的行业预期相似,其高市销率的影响没有我们预期的那么大。当我们看到平均收入和行业般的增长加上高市销率时,我们怀疑股价有下跌的风险,这也使市盈率也与行业保持一致。如果最近的中期收入趋势持续下去,将使股东的投资面临风险,潜在投资者面临支付不必要的溢价的危险。
话虽如此,请注意,在我们的投资分析中,Fsilon Furnishing and Construction Materials显示出3个警告信号,其中2个有点令人不快。
如果这些风险让你重新考虑你对Fsilon Furnishing and Construction Materials的看法,请浏览我们的高质量股票的互动清单,了解还有什么。