When you see that almost half of the companies in the Commercial Services industry in China have price-to-sales ratios (or "P/S") below 3x, Xinlun New Materials Co., Ltd. (SZSE:002341) looks to be giving off strong sell signals with its 5.1x P/S ratio. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the highly elevated P/S.
View our latest analysis for Xinlun New Materials
SZSE:002341 Price to Sales Ratio vs Industry January 24th 2024
What Does Xinlun New Materials' Recent Performance Look Like?
As an illustration, revenue has deteriorated at Xinlun New Materials 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. However, if this isn't the case, investors might get caught out paying too much for the stock.
Although there are no analyst estimates available for Xinlun New Materials, take a look at this free data-rich visualisation to see how the company stacks up on earnings, revenue and cash flow.
How Is Xinlun New Materials' Revenue Growth Trending?
Xinlun New Materials' P/S ratio would be typical for a company that's expected to deliver very strong growth, and importantly, perform much better than 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 25%. The last three years don't look nice either as the company has shrunk revenue by 71% in aggregate. Accordingly, shareholders would have felt downbeat about the medium-term rates of revenue growth.
In contrast to the company, the rest of the industry is expected to grow by 31% over the next year, which really puts the company's recent medium-term revenue decline into perspective.
With this in mind, we find it worrying that Xinlun New Materials' P/S exceeds that of its industry peers. It seems most investors are ignoring the recent poor growth rate and are hoping for a turnaround in the company's business prospects. 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.
What We Can Learn From Xinlun New Materials' 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 Xinlun New Materials 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. Right now we aren't comfortable with the high P/S as this revenue performance is highly unlikely to support such positive sentiment for long. Unless the recent medium-term conditions improve markedly, investors will have a hard time accepting the share price as fair value.
You should always think about risks. Case in point, we've spotted 2 warning signs for Xinlun New Materials you should be aware of, and 1 of them doesn't sit too well with us.
If these risks are making you reconsider your opinion on Xinlun New Materials, explore our interactive list of high quality stocks to get an idea of what else is out there.
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.
売上高が過去1年間で悪化しているため、Xinlun New Materialsではイライラするかもしれません。おそらく市場は、今後近い将来その会社が他の業界を上回るほどのことができると信じており、そのためP/S倍率が高くなっているのかもしれません。しかし、これがそうでない場合は、投資家が株式を高く買い付けることができるため、ストックを売りたいと思うかもしれません。
Xinlun New Materialsのアナリストの予測はありませんが、この無料のデータリッチのビジュアライゼーションで、収益、売上高、キャッシュフローなどの会社の比較を見てみてください。
Xinlun New Materialsの売上高はどのようにトレンドしていますか?
Xinlun New MaterialsのP/S倍率は、非常に強力な成長をもたらすことが期待される会社、特に業界よりもはるかに優れたパフォーマンスを発揮する会社に典型的です。
これを考慮すると、Xinlun New MaterialsのP/Sが業界の同僚よりも高いことは心配です。市場は最近の貧しい成長率を無視して、会社のビジネス展望の反転を期待しているようです。最近の負の成長率により、P/Sが前近年の負の成長率に沿うレベルにまで低下した場合、既存の株主が将来的な失望に自分自身を設定している可能性が非常に高いです。
Xinlun New Materialsの調査によると、中期的な売上高の減少は、成長が期待されている業界に比べて、予想よりも低いP/Sになることはないと思われます。したがって、今のところ、売上性能が高くないにもかかわらず、P/Sが高いことには不満です。最近の中期的な状況が著しく改善しない限り、投資家は、株価が公正な価値と見なされるのに苦労することになるでしょう。
いつもリスクについて考えましょう。例えば、Xinlun New Materialsの2つの警告サインを見つけました。私たちと連絡を取り合いましょう。そのうちの1つはあまり良いわけではありません。
これらのリスクがXinlun New Materialsについてのあなたの意見を再考させている場合、高品質の株式のインタラクティブなリストを探索して、他に何があるかを見てみましょう。
オーストラリアでは、moomooの投資商品及びサービスはMoomoo Securities Australia Limitedによって提供され、オーストラリア証券投資委員会(ASIC)の管理を受けております(AFSL No. 224663)。「金融サービスガイド」、「利用規約」、「プライバシーポリシー」などの詳細は、Moomoo Securities Australia Limitedのウェブサイトhttps://www.moomoo.com/auでご確認いただけます。
オーストラリアでは、moomooの投資商品及びサービスはMoomoo Securities Australia Limitedによって提供され、オーストラリア証券投資委員会(ASIC)の管理を受けております(AFSL No. 224663)。「金融サービスガイド」、「利用規約」、「プライバシーポリシー」などの詳細は、Moomoo Securities Australia Limitedのウェブサイトhttps://www.moomoo.com/auでご確認いただけます。