China Ting Group Holdings Limited (HKG:3398) shareholders that were waiting for something to happen have been dealt a blow with a 32% share price drop in the last month.    Instead of being rewarded, shareholders who have already held through the last twelve months are now sitting on a 39% share price drop.  

Even after such a large drop in price, there still wouldn't be many who think China Ting Group Holdings' price-to-sales (or "P/S") ratio of 0.3x is worth a mention when the median P/S in Hong Kong's Luxury 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.    

Check out our latest analysis for China Ting Group Holdings

SEHK:3398 Price to Sales Ratio vs Industry January 17th 2024

How Has China Ting Group Holdings Performed Recently?

As an illustration, revenue has deteriorated at China Ting Group Holdings over the last year, which is not ideal at all.   Perhaps investors believe the recent revenue performance is enough to keep in line with the industry, which is keeping the P/S from dropping off.  If not, then existing shareholders may be a little nervous about the viability of the share price.    

We don't have analyst forecasts, but you can see how recent trends are setting up the company for the future by checking out our free report on China Ting Group Holdings' earnings, revenue and cash flow.  

How Is China Ting Group Holdings' Revenue Growth Trending?  

There's an inherent assumption that a company should be matching the industry for P/S ratios like China Ting Group Holdings' to be considered reasonable.  

Retrospectively, the last year delivered a frustrating 6.8% decrease to the company's top line.   Unfortunately, that's brought it right back to where it started three years ago with revenue growth being virtually non-existent overall during that time.  Accordingly, shareholders probably wouldn't have been overly satisfied with the unstable medium-term growth rates.  

Weighing that medium-term revenue trajectory against the broader industry's one-year forecast for expansion of 12% shows it's an unpleasant look.

With this information, we find it concerning that China Ting Group 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 We Can Learn From China Ting Group Holdings' P/S?

China Ting Group Holdings' plummeting stock price has brought its P/S back to a similar region as the rest of the industry.      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 look at China Ting Group 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.  If recent medium-term revenue trends continue, it will place shareholders' investments at risk and potential investors in danger of paying an unnecessary premium.    

We don't want to rain on the parade too much, but we did also find 2 warning signs for China Ting Group Holdings (1 is significant!) that you need to be mindful of.  

If you're unsure about the strength of China Ting Group Holdings' business, why not explore our interactive list of stocks with solid business fundamentals for some other companies you may have missed.

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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.