The GEN-S POWER Group Co.,Ltd (SHSE:600753) share price has fared very poorly over the last month, falling by a substantial 27%. The drop over the last 30 days has capped off a tough year for shareholders, with the share price down 48% in that time.
Even after such a large drop in price, given close to half the companies operating in China's Trade Distributors industry have price-to-sales ratios (or "P/S") below 0.7x, you may still consider GEN-S POWER GroupLtd as a stock to potentially avoid with its 2.5x P/S ratio. However, the P/S might be high for a reason and it requires further investigation to determine if it's justified.
See our latest analysis for GEN-S POWER GroupLtd
How Has GEN-S POWER GroupLtd Performed Recently?
For example, consider that GEN-S POWER GroupLtd's financial performance has been poor lately as its revenue has been in decline. It might be that many expect the company to still outplay most other companies over the coming period, which has kept the P/S from collapsing. 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 GEN-S POWER GroupLtd will help you shine a light on its historical performance.
What Are Revenue Growth Metrics Telling Us About The High P/S?
There's an inherent assumption that a company should outperform the industry for P/S ratios like GEN-S POWER GroupLtd's to be considered reasonable.
In reviewing the last year of financials, we were disheartened to see the company's revenues fell to the tune of 65%. As a result, revenue from three years ago have also fallen 77% overall. So unfortunately, we have to acknowledge that the company has not done a great job of growing revenue over that time.
Weighing that medium-term revenue trajectory against the broader industry's one-year forecast for expansion of 17% shows it's an unpleasant look.
With this in mind, we find it worrying that GEN-S POWER GroupLtd's P/S exceeds that of its industry peers. 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 Final Word
Despite the recent share price weakness, GEN-S POWER GroupLtd's P/S remains higher than most other companies in the industry. Typically, we'd caution against reading too much into price-to-sales ratios when settling on investment decisions, though it can reveal plenty about what other market participants think about the company.
Our examination of GEN-S POWER GroupLtd 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. Should recent medium-term revenue trends persist, it would pose a significant risk to existing shareholders' investments and prospective investors will have a hard time accepting the current value of the stock.
You should always think about risks. Case in point, we've spotted 1 warning sign for GEN-S POWER GroupLtd you should be aware of.
Of course, profitable companies with a history of great earnings growth are generally safer bets. So you may wish to see this free collection of other companies that have reasonable P/E ratios and have grown earnings strongly.
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.
GEN-S POWER 集團有限公司, Ltd(上海證券交易所代碼:600753)的股價在上個月表現非常糟糕,大幅下跌了27%。過去30天的下跌結束了股東艱難的一年,當時股價下跌了48%。
即使在價格大幅下跌之後,鑑於在中國貿易分銷商行業運營的公司中有近一半的市銷比(或 “市銷率”)低於0.7倍,您仍然可以將GEN-S POWER GroupLtd視爲可以避開的股票,其市銷率爲2.5倍。但是,市銷率之高可能是有原因的,需要進一步調查以確定其是否合理。
查看我們對 GEN-S POWER GroupLtd 的最新分析
GEN-S POWER GroupLtd 最近的表現如何?
例如,假設GEN-S POWER GroupLtd最近由於收入下降而財務表現不佳。許多人可能預計,在未來一段時間內,該公司的表現仍將超過大多數其他公司,這阻止了市銷售率的暴跌。但是,如果不是這樣,投資者可能會陷入爲股票支付過多費用的困境。
想全面了解公司的收益、收入和現金流嗎?然後,我們關於GEN-S POWER GroupLtd的免費報告將幫助您了解其歷史表現。
關於高市盈率,收入增長指標告訴我們什麼?
人們固有的假設是,要使像GEN-S POWER GroupLtd這樣的市銷率被認爲是合理的,公司的表現應該優於該行業。