Gansu Huangtai Wine Marketing Industry Co., Ltd. (SZSE:000995) shareholders will no doubt be happy to see the share price up 25% in the last month, but it's still struggling to regain some recent loss. Unfortunately, last month's gains did little to make up for last year's losses, with the stock still down 22% during that time.
After such a significant price increase, Gansu Huangtai Liquor Sales Co., Ltd. is not a suitable stock when the price-to-sales ratio (P/S) of almost half of the companies in China's beverage industry is below 5.7 times. You might think about it. With a P/S ratio of 16.5x, it's worth investigating. However, there may be an explanation as to why P/S is so lofty, so it would be unwise to take it at face value.
See our latest analysis for Gansu Huangtai Wine-Marketing IndustryLtd.
Achievements of Gansu Huangtai Wine Marketing Industry Co., Ltd.
For example, consider that Gansu Huangtai Wine-Marketing IndustryLtd's recent financial performance has deteriorated due to declining revenue. Many people probably expect the company to continue to outperform most other companies over the coming period, which may be keeping it from collapsing. If not, existing shareholders could become very nervous about the viability of the stock price.
We don't have analyst forecasts, but checking our forecasts will tell you how recent trends are setting up the company's future. free Gansu Huangtai Wine-Marketing IndustryLtd earnings, revenue and cash flow report.
What is Gansu Huangtai Wine-Marketing IndustryLtd's revenue growth trend?
Gansu Huangtai Wine-Marketing IndustryLtd's profit/loss ratio is typical of a company that is expected to deliver very strong growth and, importantly, outperform its industry by far.
Looking back, last year saw the company's sales decline by 8.3%. In any case, thanks to the growth in the previous quarter, revenue has increased by a total of 28% compared to his three years ago. So while shareholders would have been hoping for a continuation of the performance, they're probably more or less happy with the medium-term earnings growth rate.
Based on recent medium-term annualized earnings results, the company's momentum is weak compared to the industry, which is expected to grow 18% over the next 12 months.
This information raises concerns that Gansu Huangtai Wine Marketing Industry Co., Ltd. is trading at a higher profit/loss than the industry. Most investors seem to be ignoring the fairly limited recent growth rate and hoping for an improvement in the company's business outlook. Only the boldest would think these prices are sustainable, as a continuation of recent earnings trends will likely ultimately weigh on the stock.
Important points
Gansu Huangtai Wine-Marketing IndustryLtd's profit and loss grew steadily last month, thanks to a significant rise in the stock price. While we typically caution against reading too much into price-to-sales ratios when making investment decisions, they can reveal a lot about what other market participants think about a company. .
It is strange to see that Gansu Huangtai Wine Marketing Industry Co., Ltd. is currently trading at a high P/S relative to its industry. That's because its growth rate over the past three years has been lower than industry-wide expectations. If we observe slower earnings growth and a higher P/S ratio than the industry, we believe there is a significant risk of share price decline, resulting in a lower P/S ratio. If recent medium-term earnings trends continue, shareholders' investments will be at significant risk and potential investors will be at risk of paying an excessive premium.
There can be many potential risks within a company's balance sheet.take a look at ours free Gansu Huangtai Wine-Marketing IndustryLtd's balance sheet analysis performs 6 simple checks on some of these important factors.
of course, Profitable companies that have a history of strong revenue growth are generally safer choices..So you might want to see this free A collection of other companies with reasonable P/E ratios and strong earnings growth.
Valuation is complex, but we help make it simple.
See if Gansu Huangtai Wine Marketing Industry Co., Ltd. is potentially overvalued or undervalued by checking out our comprehensive analysis, including: Fair value estimates, risks and caveats, dividends, insider trading, and financial health.
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This article by Simply Wall St is general in nature. We provide commentary using only unbiased methodologies, based on historical data and analyst forecasts, and articles are not intended to be financial advice. This is not a recommendation to buy or sell any stock, and does not take into account your objectives or financial situation. We aim to provide long-term, focused analysis based on fundamental data. Note that our analysis may not factor in the latest announcements or qualitative material from price-sensitive companies. Simply Wall St has no position in any stocks mentioned.
