Transportation Telecommunication & Information Development Inc.Ltd.Zhejiang (SZSE:300469) Shares May Have Slumped 27% But Getting In Cheap Is Still Unlikely
Transportation Telecommunication & Information Development Inc.Ltd.Zhejiang (SZSE:300469) Shares May Have Slumped 27% But Getting In Cheap Is Still Unlikely
Transportation Telecommunication & Information Development Inc.Ltd.Zhejiang (SZSE:300469) shareholders won't be pleased to see that the share price has had a very rough month, dropping 27% and undoing the prior period's positive performance. Instead of being rewarded, shareholders who have already held through the last twelve months are now sitting on a 44% share price drop.
Although its price has dipped substantially, you could still be forgiven for thinking Transportation Telecommunication & Information DevelopmentLtd.Zhejiang is a stock to steer clear of with a price-to-sales ratios (or "P/S") of 11.7x, considering almost half the companies in China's IT industry have P/S ratios below 3.4x. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the highly elevated P/S.
What Does Transportation Telecommunication & Information DevelopmentLtd.Zhejiang's P/S Mean For Shareholders?
For example, consider that Transportation Telecommunication & Information DevelopmentLtd.Zhejiang's financial performance has been poor lately as its revenue has been in decline. One possibility is that the P/S is high because investors think the company will still do enough to outperform the broader industry in the near future. You'd really hope so, otherwise you're paying a pretty hefty price for no particular reason.
Want the full picture on earnings, revenue and cash flow for the company? Then our free report on Transportation Telecommunication & Information DevelopmentLtd.Zhejiang will help you shine a light on its historical performance.
Do Revenue Forecasts Match The High P/S Ratio?
The only time you'd be truly comfortable seeing a P/S as steep as Transportation Telecommunication & Information DevelopmentLtd.Zhejiang's is when the company's growth is on track to outshine the industry decidedly.
In reviewing the last year of financials, we were disheartened to see the company's revenues fell to the tune of 15%. The last three years don't look nice either as the company has shrunk revenue by 63% in aggregate. Accordingly, shareholders would have felt downbeat about the medium-term rates of revenue growth.
Weighing that medium-term revenue trajectory against the broader industry's one-year forecast for expansion of 25% shows it's an unpleasant look.
With this in mind, we find it worrying that Transportation Telecommunication & Information DevelopmentLtd.Zhejiang's P/S exceeds that of its industry peers. Apparently many investors in the company are way more bullish than recent times would indicate and aren't willing to let go of their stock at any price. There's a very 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.
The Final Word
A significant share price dive has done very little to deflate Transportation Telecommunication & Information DevelopmentLtd.Zhejiang's very lofty P/S. 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.
Our examination of Transportation Telecommunication & Information DevelopmentLtd.Zhejiang revealed its shrinking revenue over the medium-term isn't resulting in a P/S as low as we expected, given the industry is set to grow. With a revenue decline on investors' minds, the likelihood of a souring sentiment is quite high which could send the P/S back in line with what we'd expect. If recent medium-term revenue trends continue, it will place shareholders' investments at significant risk and potential investors in danger of paying an excessive premium.
Before you take the next step, you should know about the 2 warning signs for Transportation Telecommunication & Information DevelopmentLtd.Zhejiang that we have uncovered.
If strong companies turning a profit tickle your fancy, then you'll want to check out this free list of interesting companies that trade on a low P/E (but have proven they can grow earnings).
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.
Transportation Telecommunication & Information Development Inc.Ltd.Zhejiang (SZSE:300469)股東們看到股價在過去的一個月裏經歷了慘痛的跌幅,下跌了27%,扼殺了之前的正面表現。在過去的12個月裏,持有股份的股東們看到更加糟糕的結果,股價下跌了44%。
儘管Transportation Telecommunication & Information DevelopmentLtd.Zhejiang的股價已經大幅下跌,但考慮到中國IT行業中有將近一半的公司的市銷率低於3.4倍,其市銷率高達11.7倍,你仍然可以原諒地認爲這是一支需要避開的股票。但我們需要深入挖掘,以確定高昂的市銷率是否有合理的基礎。
Transportation Telecommunication & Information DevelopmentLtd.Zhejiang的市銷率對股東意味着什麼?
例如,考慮到Transportation Telecommunication & Information DevelopmentLtd.Zhejiang的財務表現近來一直很差,其營業收入一直在下降。有一種可能是市銷率較高,因爲投資者認爲該公司在不久的將來仍然可以在更廣泛的行業中表現出色。你真的希望如此,否則你爲什麼要支付如此巨額的價格呢?
想要了解Transportation Telecommunication & Information DevelopmentLtd.Zhejiang公司的收益、營業收入和現金流的全部情況嗎?那麼我們爲你提供的關於其歷史表現的免費報告將會幫助你照亮前方。
營業收入預測是否與高市銷率相匹配?
只有當公司的增長有望明顯超過行業水平時,你才會真正放心地看到像Transportation Telecommunication & Information DevelopmentLtd.Zhejiang這樣高昂的市銷率。
考慮到Transportation Telecommunication & Information DevelopmentLtd.Zhejiang的市銷率超過其行業同行們,我們感到擔憂。顯然,公司的很多投資者比最近的情況更加看好,不願以任何價格拋出股票。如果市銷率降至近期負增長率的水平,現有股東們很可能爲未來的失望感到不安。
最終結論
股價的大幅下跌幾乎沒有減弱Transportation Telecommunication & Information DevelopmentLtd.Zhejiang市銷率的高昂程度。通常情況下,我們更傾向於將市銷率用於確定市場對於公司整體健康狀況的看法。
我們對Transportation Telecommunication & Information DevelopmentLtd.Zhejiang的檢查顯示,其中期營收的下降並未帶來我們所期望的市銷率降低,考慮到行業增長。隨着投資者開始擔心營業收入下降的問題,情緒變得更加惡劣,這可能使得市銷率回落到我們所期望的水平。如果近期中期營收的趨勢持續下去,它將會讓股東的投資面臨重要風險,而潛在投資者也有可能因爲過高的溢價而面臨風險。
在你邁出下一步之前,你應該知道我們發現的Transportation Telecommunication & Information DevelopmentLtd.Zhejiang的2個警告信號。