The D&O Home Collection Group Co.,LTD (SZSE:002798) share price has fared very poorly over the last month, falling by a substantial 26%. Instead of being rewarded, shareholders who have already held through the last twelve months are now sitting on a 49% share price drop.
After such a large drop in price, when close to half the companies operating in China's Building industry have price-to-sales ratios (or "P/S") above 1.5x, you may consider D&O Home Collection GroupLTD as an enticing stock to check out with its 0.3x P/S ratio. However, the P/S might be low for a reason and it requires further investigation to determine if it's justified.
What Does D&O Home Collection GroupLTD's Recent Performance Look Like?
For example, consider that D&O Home Collection GroupLTD's financial performance has been poor lately as its revenue has been in decline. One possibility is that the P/S is low because investors think the company won't do enough to avoid underperforming the broader industry in the near future. If you like the company, you'd be hoping this isn't the case so that you could potentially pick up some stock while it's out of favour.
Although there are no analyst estimates available for D&O Home Collection GroupLTD, take a look at this free data-rich visualisation to see how the company stacks up on earnings, revenue and cash flow.
What Are Revenue Growth Metrics Telling Us About The Low P/S?
The only time you'd be truly comfortable seeing a P/S as low as D&O Home Collection GroupLTD's is when the company's growth is on track to lag the industry.
Retrospectively, the last year delivered a frustrating 6.1% decrease to the company's top line. This means it has also seen a slide in revenue over the longer-term as revenue is down 38% in total over the last three years. Therefore, it's fair to say the revenue growth recently has been undesirable for the company.
In contrast to the company, the rest of the industry is expected to grow by 24% over the next year, which really puts the company's recent medium-term revenue decline into perspective.
With this information, we are not surprised that D&O Home Collection GroupLTD is trading at a P/S lower than the industry. However, we think shrinking revenues are unlikely to lead to a stable P/S over the longer term, which could set up shareholders for future disappointment. There's potential for the P/S to fall to even lower levels if the company doesn't improve its top-line growth.
The Final Word
D&O Home Collection GroupLTD's recently weak share price has pulled its P/S back below other Building companies. 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.
As we suspected, our examination of D&O Home Collection GroupLTD revealed its shrinking revenue over the medium-term is contributing to its low P/S, given the industry is set to grow. At this stage investors feel the potential for an improvement in revenue isn't great enough to justify a higher P/S ratio. If recent medium-term revenue trends continue, it's hard to see the share price moving strongly in either direction in the near future under these circumstances.
Before you settle on your opinion, we've discovered 2 warning signs for D&O Home Collection GroupLTD (1 can't be ignored!) that you should be aware of.
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.
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.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com
D&O Home Collection Group股份有限公司(SZSE:002798)股价在过去一个月表现非常糟糕,下跌了26%。股东们本该获得回报,但是那些已经持有该股票的股东现在却面临着49%的股价下跌。
在股价大跌之后,当接近半数在中国建筑行业运营的公司的市销率(或“P/S”)高于1.5倍时,您可以考虑D&O Home Collection GroupLTD是一只令人感到诱人的股票,其市销率仅为0.3倍。但是,市销率之所以低,可能有其原因,需要进一步调查来判断其是否合理。
D&O Home Collection GroupLTD最近的业绩表现如何?
例如,考虑到D&O Home Collection GroupLTD的财务表现最近一直不佳,营业收入一直在下降,其中一个可能原因是,投资者认为该公司未能在不久的将来避免在整个行业表现不佳。如果您喜欢这家公司,您会希望这不是真的,这样您就可以在它不受青睐的时候潜在地购买一些股票。
尽管目前没有关于D&O Home Collection GroupLTD的分析师预测,但可以查看这个免费的数据丰富的可视化工具,以了解该公司在收益、营业收入和现金流上的情况。
营收增长指标告诉我们关于低市销率的什么?
只有当公司的增长势头落后于行业时,您才会真正放心地看到D&O Home Collection GroupLTD这样低的市销率。