Phoenix Media Investment (Holdings) Limited (HKG:2008) shares have had a really impressive month, gaining 26% after a shaky period beforehand. Not all shareholders will be feeling jubilant, since the share price is still down a very disappointing 23% in the last twelve months.
Even after such a large jump in price, there still wouldn't be many who think Phoenix Media Investment (Holdings)'s price-to-sales (or "P/S") ratio of 0.5x is worth a mention when the median P/S in Hong Kong's Media industry is similar at about 0.7x. However, investors might be overlooking a clear opportunity or potential setback if there is no rational basis for the P/S.
View our latest analysis for Phoenix Media Investment (Holdings)
How Phoenix Media Investment (Holdings) Has Been Performing
For example, consider that Phoenix Media Investment (Holdings)'s financial performance has been poor lately as its revenue has been in decline. One possibility is that the P/S is moderate because investors think the company might still do enough to be in line with the broader industry in the near future. If you like the company, you'd at least be hoping this is the case so that you could potentially pick up some stock while it's not quite in favour.
Want the full picture on earnings, revenue and cash flow for the company? Then our free report on Phoenix Media Investment (Holdings) will help you shine a light on its historical performance.
What Are Revenue Growth Metrics Telling Us About The P/S?
In order to justify its P/S ratio, Phoenix Media Investment (Holdings) would need to produce growth that's similar to the industry.
In reviewing the last year of financials, we were disheartened to see the company's revenues fell to the tune of 19%. This means it has also seen a slide in revenue over the longer-term as revenue is down 20% in total over the last three years. 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 18% 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 find it worrying that Phoenix Media Investment (Holdings)'s P/S exceeds that of its industry peers. 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 Does Phoenix Media Investment (Holdings)'s P/S Mean For Investors?
Its shares have lifted substantially and now Phoenix Media Investment (Holdings)'s P/S is back within range of the industry median. While the price-to-sales ratio shouldn't be the defining factor in whether you buy a stock or not, it's quite a capable barometer of revenue expectations.
Our look at Phoenix Media Investment (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.
It is also worth noting that we have found 1 warning sign for Phoenix Media Investment (Holdings) that you need to take into consideration.
If strong companies turning a profit tickle your fancy, then you'll want to check out this free list of interesting companies that trade on a low P/E (but have proven they can grow earnings).
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我們對Phoenix Media Investment(Holdings)的觀察顯示,鑑於該行業必將增長,其中期收入萎縮對市盈率的影響沒有我們預期的那麼大。在行業預測不斷增長的背景下,當我們看到收入倒退時,預計股價可能下跌,從而使溫和的市盈率下降是有道理的。如果最近的中期收入趨勢繼續下去,將使股東的投資面臨風險,潛在投資者面臨支付不必要的溢價的危險。