Star CM Holdings Limited (HKG:6698) shareholders that were waiting for something to happen have been dealt a blow with a 51% share price drop in the last month. For any long-term shareholders, the last month ends a year to forget by locking in a 96% share price decline.
In spite of the heavy fall in price, when almost half of the companies in Hong Kong's Entertainment industry have price-to-sales ratios (or "P/S") below 1.7x, you may still consider Star CM Holdings as a stock probably not worth researching with its 3.4x P/S ratio. However, the P/S might be high for a reason and it requires further investigation to determine if it's justified.
How Has Star CM Holdings Performed Recently?
For example, consider that Star CM Holdings' financial performance has been poor lately as its revenue has been in decline. Perhaps the market believes the company can do enough to outperform the rest of the industry in the near future, which is keeping the P/S ratio high. However, if this isn't the case, investors might get caught out paying too much for the stock.
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 Star CM Holdings' earnings, revenue and cash flow.
What Are Revenue Growth Metrics Telling Us About The High P/S?
In order to justify its P/S ratio, Star CM Holdings would need to produce impressive growth in excess of the industry.
In reviewing the last year of financials, we were disheartened to see the company's revenues fell to the tune of 51%. As a result, revenue from three years ago have also fallen 73% overall. Therefore, it's fair to say the revenue growth recently has been undesirable for the company.
Comparing that to the industry, which is predicted to deliver 20% growth in the next 12 months, the company's downward momentum based on recent medium-term revenue results is a sobering picture.
With this information, we find it concerning that Star CM Holdings is trading at a P/S higher than the industry. It seems most investors are ignoring the recent poor growth rate and are hoping for a turnaround in the company's business prospects. Only the boldest would assume these prices are sustainable as a continuation of recent revenue trends is likely to weigh heavily on the share price eventually.
The Final Word
There's still some elevation in Star CM Holdings' P/S, even if the same can't be said for its share price recently. 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.
We've established that Star CM Holdings currently trades on a much higher than expected P/S since its recent revenues have been in decline over the medium-term. When we see revenue heading backwards and underperforming the industry forecasts, we feel the possibility of the share price declining is very real, bringing the P/S back into the realm of reasonability. 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.
It's always necessary to consider the ever-present spectre of investment risk. We've identified 3 warning signs with Star CM Holdings (at least 1 which can't be ignored), and understanding these should be part of your investment process.
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.
上个月股价下跌了51%,这给那些等待事情发生的Star CM Holdings Limited(HKG: 6698)的股东受到了打击。对于任何长期股东来说,最后一个月的股价下跌幅度为96%,从而结束了令人难忘的一年。
尽管价格大幅下跌,但当香港娱乐业将近一半的公司的市销率(或 “市销率”)低于1.7倍时,你仍然可以认为Star CM Holdings的股票,其市销率为3.4倍,可能不值得研究。但是,市销率之高可能是有原因的,需要进一步调查以确定其是否合理。
Star CM Holdings最近表现如何?
例如,假设由于收入下降,Star CM Holdings的财务表现不佳。也许市场认为该公司有足够的能力在不久的将来跑赢其他行业,从而保持较高的市销率。但是,如果不是这样,投资者可能会陷入为股票支付过多费用的困境。
我们没有分析师的预测,但您可以查看我们关于Star CM Holdings收益、收入和现金流的免费报告,了解最近的趋势如何为公司未来做好准备。
根据这些信息,我们发现Star CM Holdings的市销率高于该行业。看来大多数投资者都忽视了最近的糟糕增长率,并希望公司的业务前景有所好转。只有最大胆的人才会假设这些价格是可持续的,因为近期收入趋势的延续最终可能会严重压制股价。
最后一句话
尽管Star CM Holdings最近的股价不能这样说,但其市销率仍有所提高。仅使用市销率来确定是否应该出售股票是不明智的,但它可以作为公司未来前景的实用指南。
我们已经确定,Star CM Holdings目前的市销率远高于预期,因为其最近的收入在中期内有所下降。当我们看到收入倒退且表现低于行业预测时,我们认为股价下跌的可能性是真实存在的,这使市销率回到了合理的境地。如果最近的中期收入趋势持续下去,将对现有股东的投资构成重大风险,潜在投资者将很难接受股票的当前价值。
始终有必要考虑永远存在的投资风险幽灵。我们已经向Star CM Holdings发现了3个警告信号(至少有1个不容忽视),了解这些信号应该是您投资过程的一部分。