Great World Company Holdings Ltd (HKG:8003) shares have had a horrible month, losing 29% after a relatively good period beforehand. The drop over the last 30 days has capped off a tough year for shareholders, with the share price down 33% in that time.
In spite of the heavy fall in price, there still wouldn't be many who think Great World Company Holdings' price-to-sales (or "P/S") ratio of 1x is worth a mention when the median P/S in Hong Kong's Forestry industry is similar at about 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.
How Has Great World Company Holdings Performed Recently?
As an illustration, revenue has deteriorated at Great World Company Holdings over the last year, which is not ideal at all. 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 not, then existing shareholders may be a little 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 Great World Company Holdings will help you shine a light on its historical performance.
How Is Great World Company Holdings' Revenue Growth Trending?
Great World Company Holdings' 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.
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 43%. This means it has also seen a slide in revenue over the longer-term as revenue is down 78% in total over the last three years. Therefore, it's fair to say the revenue growth recently has been undesirable for the company.
Comparing that to the industry, which is predicted to deliver 13% 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 Great World Company Holdings 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 Great World Company Holdings' P/S Mean For Investors?
Great World Company Holdings' 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.
Our look at Great World Company Holdings 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 recent medium-term conditions improve markedly, investors will have a hard time accepting the share price as fair value.
There are also other vital risk factors to consider and we've discovered 3 warning signs for Great World Company Holdings (2 shouldn't be ignored!) that you should be aware of before investing here.
It's important to make sure you look for a great company, not just the first idea you come across. So if growing profitability aligns with your idea of a great company, take a peek at this free list of interesting companies with strong recent earnings growth (and a low P/E).
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.
Great World Company Holdings Ltd(HKG: 8003)的股價經歷了一個糟糕的月份,在經歷了相對不錯的時期之後下跌了29%。過去30天的下跌結束了股東艱難的一年,股價在此期間下跌了33%。
儘管價格大幅下跌,但當香港林業的市盈率中位數約爲0.6倍時,仍然沒有多少人認爲Great World Company Holdings的1倍市銷率(或 “市銷率”)值得一提。但是,不加解釋地忽略市銷率是不明智的,因爲投資者可能會忽視一個明顯的機會或一個代價高昂的錯誤。
Great World Company Holdings的股價暴跌使其市銷率回到了與該行業其他公司相似的水平。儘管市銷率不應該成爲決定你是否買入股票的決定性因素,但它是衡量收入預期的有力晴雨表。
我們對Great World Company Holdings的調查顯示,鑑於該行業即將增長,其中期收入萎縮對市銷率的影響沒有我們預期的那麼大。在行業預測不斷增長的背景下,當我們看到收入倒退時,預計股價可能會下跌,從而使溫和的市銷率走低是有道理的。除非最近的中期狀況明顯改善,否則投資者將很難接受股價作爲公允價值。
還有其他重要的風險因素需要考慮,我們已經發現了Great World Company Holdings的3個警告信號(其中2個不容忽視!)在這裏投資之前,您應該注意這一點。