Unfortunately for some shareholders, the Cubic Digital Technology Co.,Ltd. (SZSE:300344) share price has dived 26% in the last thirty days, prolonging recent pain. The drop over the last 30 days has capped off a tough year for shareholders, with the share price down 41% in that time.
In spite of the heavy fall in price, given close to half the companies operating in China's Electronic industry have price-to-sales ratios (or "P/S") below 3.6x, you may still consider Cubic Digital TechnologyLtd as a stock to potentially avoid with its 4.5x P/S ratio. 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.
SZSE:300344 Price to Sales Ratio vs Industry April 15th 2024
What Does Cubic Digital TechnologyLtd's P/S Mean For Shareholders?
As an illustration, revenue has deteriorated at Cubic Digital TechnologyLtd 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. If not, then existing shareholders may be quite nervous about the viability of the share price.
Want the full picture on earnings, revenue and cash flow for the company? Then our free report on Cubic Digital TechnologyLtd will help you shine a light on its historical performance.
Is There Enough Revenue Growth Forecasted For Cubic Digital TechnologyLtd?
There's an inherent assumption that a company should outperform the industry for P/S ratios like Cubic Digital TechnologyLtd's to be considered reasonable.
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 15%. However, a few very strong years before that means that it was still able to grow revenue by an impressive 96% in total over the last three years. So we can start by confirming that the company has generally done a very good job of growing revenue over that time, even though it had some hiccups along the way.
Comparing that to the industry, which is predicted to deliver 23% growth in the next 12 months, the company's momentum is pretty similar based on recent medium-term annualised revenue results.
With this in mind, we find it intriguing that Cubic Digital TechnologyLtd's P/S exceeds that of its industry peers. It seems most investors are ignoring the fairly average recent growth rates and are willing to pay up for exposure to the stock. Although, additional gains will be difficult to achieve as a continuation of recent revenue trends would weigh down the share price eventually.
The Key Takeaway
There's still some elevation in Cubic Digital TechnologyLtd's P/S, even if the same can't be said for its share price recently. 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 Cubic Digital TechnologyLtd 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. Right now we are uncomfortable with the high P/S as this revenue performance isn't likely to support such positive sentiment for long. Unless there is a significant improvement in the company's medium-term trends, it will be difficult to prevent the P/S ratio from declining to a more reasonable level.
Don't forget that there may be other risks. For instance, we've identified 3 warning signs for Cubic Digital TechnologyLtd 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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考虑到这一点,我们发现有趣的是,Cubic Digital TechnologyLtd的市销率超过了业内同行。看来大多数投资者都无视近期相当平均的增长率,愿意为股票敞口付出代价。但是,由于近期收入趋势的延续最终将压低股价,因此很难实现额外的收益。
关键要点
尽管Cubic Digital TechnologyLtd最近的股价不能这样说,但其市销率仍有所提高。我们可以说,市销比率的力量主要不是作为一种估值工具,而是用来衡量当前的投资者情绪和未来预期。
我们对Cubic Digital TechnologyLtd的审查显示,其三年收入趋势对其高市销率的影响没有我们预期的那么大,因为它们看起来与当前的行业预期相似。目前,我们对高市销率感到不舒服,因为这种收入表现不太可能长期支撑这种积极情绪。除非公司的中期趋势有显著改善,否则很难阻止市销率下降到更合理的水平。
别忘了可能还有其他风险。例如,我们已经确定了Cubic Digital TechnologyLtd的3个警告信号,你应该注意这些信号。