Unfortunately for some shareholders, the Cenntro Electric Group Limited (NASDAQ:CENN) share price has dived 35% in the last thirty days, prolonging recent pain. For any long-term shareholders, the last month ends a year to forget by locking in a 64% share price decline.
After such a large drop in price, Cenntro Electric Group's price-to-sales (or "P/S") ratio of 2.6x might make it look like a strong buy right now compared to the wider Auto industry in the United States, where around half of the companies have P/S ratios above 5.2x and even P/S above 13x are quite common. However, the P/S might be quite low for a reason and it requires further investigation to determine if it's justified.
View our latest analysis for Cenntro Electric Group
What Does Cenntro Electric Group's P/S Mean For Shareholders?
Recent times have been quite advantageous for Cenntro Electric Group as its revenue has been rising very briskly. It might be that many expect the strong revenue performance to degrade substantially, which has repressed the P/S ratio. 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 Cenntro Electric Group will help you shine a light on its historical performance.
Do Revenue Forecasts Match The Low P/S Ratio?
Cenntro Electric Group's P/S ratio would be typical for a company that's expected to deliver very poor growth or even falling revenue, and importantly, perform much worse than the industry.
If we review the last year of revenue growth, the company posted a terrific increase of 50%. The latest three year period has also seen an excellent 180% overall rise in revenue, aided by its short-term performance. Therefore, it's fair to say the revenue growth recently has been superb for the company.
Comparing that recent medium-term revenue trajectory with the industry's one-year growth forecast of 31% shows it's noticeably more attractive.
With this information, we find it odd that Cenntro Electric Group is trading at a P/S lower than the industry. It looks like most investors are not convinced the company can maintain its recent growth rates.
The Final Word
Having almost fallen off a cliff, Cenntro Electric Group's share price has pulled its P/S way down as well. It's argued the price-to-sales ratio is an inferior measure of value within certain industries, but it can be a powerful business sentiment indicator.
We're very surprised to see Cenntro Electric Group currently trading on a much lower than expected P/S since its recent three-year growth is higher than the wider industry forecast. When we see strong revenue with faster-than-industry growth, we assume there are some significant underlying risks to the company's ability to make money which is applying downwards pressure on the P/S ratio. While recent revenue trends over the past medium-term suggest that the risk of a price decline is low, investors appear to perceive a likelihood of revenue fluctuations in the future.
Before you take the next step, you should know about the 5 warning signs for Cenntro Electric Group (2 are potentially serious!) that we have uncovered.
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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有了這些信息,我們發現奇怪的是,Centro Electric Group的市銷售率低於該行業。看來大多數投資者不相信該公司能夠維持其最近的增長率。
最後一句話
差點跌下懸崖的Centro Electric Group的股價也大幅下調了市銷率。有人認爲,在某些行業中,市銷率是衡量價值的次要指標,但它可以是一個有力的商業信心指標。
我們非常驚訝地看到,Centro Electric Group目前的市銷率遠低於預期,因爲其最近三年的增長高於整個行業的預期。當我們看到強勁的收入和比行業更快的增長速度時,我們假設公司的盈利能力存在一些重大的潛在風險,這給市銷率帶來了下行壓力。儘管過去中期最近的收入趨勢表明價格下跌的風險很低,但投資者似乎認爲未來收入可能會出現波動。
在採取下一步行動之前,你應該了解Centro Electric Group的5個警告信號(其中2個可能很嚴重!)我們已經發現了。