CSMall Group Limited (HKG:1815) shares have had a really impressive month, gaining 31% after a shaky period beforehand. Not all shareholders will be feeling jubilant, since the share price is still down a very disappointing 35% in the last twelve months.
Even after such a large jump in price, it's still not a stretch to say that CSMall Group's price-to-sales (or "P/S") ratio of 0.3x right now seems quite "middle-of-the-road" compared to the Specialty Retail industry in Hong Kong, where the median P/S ratio is around 0.5x. While this might not raise any eyebrows, if the P/S ratio is not justified investors could be missing out on a potential opportunity or ignoring looming disappointment.
View our latest analysis for CSMall Group
How CSMall Group Has Been Performing
With revenue growth that's exceedingly strong of late, CSMall Group has been doing very well. The P/S is probably moderate because investors think this strong revenue growth might not be enough to outperform the broader industry in the near future. If that doesn't eventuate, then existing shareholders have reason to be feeling optimistic about the future direction of the share price.
Although there are no analyst estimates available for CSMall Group, take a look at this free data-rich visualisation to see how the company stacks up on earnings, revenue and cash flow.
How Is CSMall Group's Revenue Growth Trending?
In order to justify its P/S ratio, CSMall Group would need to produce growth that's similar to the industry.
Taking a look back first, we see that the company's revenues underwent some rampant growth over the last 12 months. The amazing performance means it was also able to grow revenue by 43% in total over the last three years. Therefore, it's fair to say the revenue growth recently has been superb for the company.
It's interesting to note that the rest of the industry is similarly expected to grow by 13% over the next year, which is fairly even with the company's recent medium-term annualised growth rates.
With this in consideration, it's clear to see why CSMall Group's P/S matches up closely to its industry peers. It seems most investors are expecting to see average growth rates continue into the future and are only willing to pay a moderate amount for the stock.
What We Can Learn From CSMall Group's P/S?
Its shares have lifted substantially and now CSMall Group's P/S is back within range of the industry median. 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.
It appears to us that CSMall Group maintains its moderate P/S off the back of its recent three-year growth being in line with the wider industry forecast. With previous revenue trends that keep up with the current industry outlook, it's hard to justify the company's P/S ratio deviating much from it's current point. Given the current circumstances, it seems improbable that the share price will experience any significant movement in either direction in the near future if recent medium-term revenue trends persist.
It is also worth noting that we have found 3 warning signs for CSMall Group (1 is concerning!) 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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オーストラリアでは、moomooの投資商品及びサービスはMoomoo Securities Australia Limitedによって提供され、オーストラリア証券投資委員会(ASIC)の管理を受けております(AFSL No. 224663)。「金融サービスガイド」、「利用規約」、「プライバシーポリシー」などの詳細は、Moomoo Securities Australia Limitedのウェブサイトhttps://www.moomoo.com/auでご確認いただけます。