Despite an already strong run, Kaiyuan Education Technology Group Co., Ltd. (SZSE:300338) shares have been powering on, with a gain of 48% in the last thirty days. Still, the 30-day jump doesn't change the fact that longer term shareholders have seen their stock decimated by the 53% share price drop in the last twelve months.
Since its price has surged higher, given close to half the companies operating in China's Electronic industry have price-to-sales ratios (or "P/S") below 3.3x, you may consider Kaiyuan Education Technology Group as a stock to potentially avoid with its 4.1x P/S ratio. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's as high as it is.
How Kaiyuan Education Technology Group Has Been Performing
For example, consider that Kaiyuan Education Technology Group'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. However, if this isn't the case, investors might get caught out paying too much for the stock.
Want the full picture on earnings, revenue and cash flow for the company? Then our free report on Kaiyuan Education Technology Group will help you shine a light on its historical performance.
How Is Kaiyuan Education Technology Group's Revenue Growth Trending?
There's an inherent assumption that a company should outperform the industry for P/S ratios like Kaiyuan Education Technology Group's to be considered reasonable.
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 60%. 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. 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 29% over the next year, which really puts the company's recent medium-term revenue decline into perspective.
With this information, we find it concerning that Kaiyuan Education Technology Group is trading at a P/S higher than the industry. 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 Bottom Line On Kaiyuan Education Technology Group's P/S
The large bounce in Kaiyuan Education Technology Group's shares has lifted the company's P/S handsomely. 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 Kaiyuan Education Technology Group 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.
Plus, you should also learn about these 3 warning signs we've spotted with Kaiyuan Education Technology Group.
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.
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.
すでに強い展開を見せているが、Kaiyuan Education Technology Group Co., Ltd.(SZSE:300338)の株価は引き続き上昇し、過去30日間で48%の上昇を記録しています。しかし、30日間の上昇でも、長期の株主は過去12か月で株価が53%下落し、株を大きく減らされたことには変わりありません。
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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。