The Telling Telecommunication Holding Co.,Ltd (SZSE:000829) share price has softened a substantial 28% over the previous 30 days, handing back much of the gains the stock has made lately. The recent drop has obliterated the annual return, with the share price now down 7.3% over that longer period.
Even after such a large drop in price, Telling Telecommunication HoldingLtd may still be sending very bullish signals at the moment with its price-to-sales (or "P/S") ratio of 0.1x, since almost half of all companies in the Electronic industry in China have P/S ratios greater than 4.3x and even P/S higher than 8x are not unusual. However, the P/S might be quite low for a reason and it requires further investigation to determine if it's justified.
View our latest analysis for Telling Telecommunication HoldingLtd
What Does Telling Telecommunication HoldingLtd's P/S Mean For Shareholders?
Telling Telecommunication HoldingLtd certainly has been doing a good job lately as it's been growing revenue more than most other companies. Perhaps the market is expecting future revenue performance to dive, which has kept the P/S suppressed. If not, then existing shareholders have reason to be quite optimistic about the future direction of the share price.
Is There Any Revenue Growth Forecasted For Telling Telecommunication HoldingLtd?
There's an inherent assumption that a company should far underperform the industry for P/S ratios like Telling Telecommunication HoldingLtd's to be considered reasonable.
Retrospectively, the last year delivered an exceptional 28% gain to the company's top line. The strong recent performance means it was also able to grow revenue by 57% in total over the last three years. Therefore, it's fair to say the revenue growth recently has been superb for the company.
Shifting to the future, estimates from the only analyst covering the company suggest revenue should grow by 8.4% over the next year. With the industry predicted to deliver 62% growth, the company is positioned for a weaker revenue result.
In light of this, it's understandable that Telling Telecommunication HoldingLtd's P/S sits below the majority of other companies. Apparently many shareholders weren't comfortable holding on while the company is potentially eyeing a less prosperous future.
What We Can Learn From Telling Telecommunication HoldingLtd's P/S?
Shares in Telling Telecommunication HoldingLtd have plummeted and its P/S has followed suit. Using the price-to-sales ratio alone to determine if you should sell your stock isn't sensible, however it can be a practical guide to the company's future prospects.
As we suspected, our examination of Telling Telecommunication HoldingLtd's analyst forecasts revealed that its inferior revenue outlook is contributing to its low P/S. Right now shareholders are accepting the low P/S as they concede future revenue probably won't provide any pleasant surprises. The company will need a change of fortune to justify the P/S rising higher in the future.
Plus, you should also learn about these 3 warning signs we've spotted with Telling Telecommunication HoldingLtd (including 2 which are concerning).
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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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.
