Macrolink Culturaltainment Development Co., Ltd.'s (SZSE:000620) price-to-sales (or "P/S") ratio of 0.7x might make it look like a buy right now compared to the Real Estate industry in China, where around half of the companies have P/S ratios above 1.6x and even P/S above 4x are quite common. However, the P/S might be low for a reason and it requires further investigation to determine if it's justified.
What Does Macrolink Culturaltainment Development's P/S Mean For Shareholders?
For example, consider that Macrolink Culturaltainment Development's financial performance has been poor lately as its revenue has been in decline. Perhaps the market believes the recent revenue performance isn't good enough to keep up the industry, causing the P/S ratio to suffer. If you like the company, you'd be hoping this isn't the case so that you could potentially pick up some stock while it's out of favour.
Want the full picture on earnings, revenue and cash flow for the company? Then our free report on Macrolink Culturaltainment Development will help you shine a light on its historical performance.
What Are Revenue Growth Metrics Telling Us About The Low P/S?
The only time you'd be truly comfortable seeing a P/S as low as Macrolink Culturaltainment Development's is when the company's growth is on track to lag the industry.
In reviewing the last year of financials, we were disheartened to see the company's revenues fell to the tune of 39%. This means it has also seen a slide in revenue over the longer-term as revenue is down 52% in total over the last three years. So unfortunately, we have to acknowledge that the company has not done a great job of growing revenue over that time.
Comparing that to the industry, which is predicted to deliver 9.3% growth in the next 12 months, the company's downward momentum based on recent medium-term revenue results is a sobering picture.
With this in mind, we understand why Macrolink Culturaltainment Development's P/S is lower than most of its industry peers. However, we think shrinking revenues are unlikely to lead to a stable P/S over the longer term, which could set up shareholders for future disappointment. Even just maintaining these prices could be difficult to achieve as recent revenue trends are already weighing down the shares.
What We Can Learn From Macrolink Culturaltainment Development's P/S?
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.
Our examination of Macrolink Culturaltainment Development confirms that the company's shrinking revenue over the past medium-term is a key factor in its low price-to-sales ratio, given the industry is projected to grow. Right now shareholders are accepting the low P/S as they concede future revenue probably won't provide any pleasant surprises either. Unless the recent medium-term conditions improve, they will continue to form a barrier for the share price around these levels.
It is also worth noting that we have found 2 warning signs for Macrolink Culturaltainment Development that you need to take into consideration.
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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例如,假设Macrolink Culturainment Development Development Development最近由于收入下降而财务表现不佳。也许市场认为最近的收入表现不足以维持该行业的步伐,从而导致市销率受到影响。如果你喜欢这家公司,你希望情况并非如此,这样你就有可能在它失宠的时候买入一些股票。
我们对Macrolink CulturalTainment Development Development的审查证实,鉴于该行业预计将增长,该公司在过去的中期收入萎缩是其低市销率的关键因素。目前,股东们正在接受低市销率,因为他们承认未来的收入可能也不会带来任何惊喜。除非最近的中期状况有所改善,否则它们将继续构成股价在这些水平附近的障碍。