The Link-Asia International MedTech Group Limited (HKG:1143) share price has fared very poorly over the last month, falling by a substantial 58%. Instead of being rewarded, shareholders who have already held through the last twelve months are now sitting on a 14% share price drop.
Even after such a large drop in price, you could still be forgiven for feeling indifferent about Link-Asia International MedTech Group's P/S ratio of 0.3x, since the median price-to-sales (or "P/S") ratio for the Electronic industry in Hong Kong is also close to 0.4x. Although, it's not wise to simply ignore the P/S without explanation as investors may be disregarding a distinct opportunity or a costly mistake.
Check out our latest analysis for Link-Asia International MedTech Group
How Has Link-Asia International MedTech Group Performed Recently?
For instance, Link-Asia International MedTech Group's receding revenue in recent times would have to be some food for thought. Perhaps investors believe the recent revenue performance is enough to keep in line with the industry, which is keeping the P/S from dropping off. If not, then existing shareholders may be a little nervous about the viability of the share price.Although there are no analyst estimates available for Link-Asia International MedTech 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 Link-Asia International MedTech Group's Revenue Growth Trending?
Link-Asia International MedTech Group's P/S ratio would be typical for a company that's only expected to deliver moderate growth, and importantly, perform in line with the industry.
Retrospectively, the last year delivered a frustrating 22% decrease to the company's top line. As a result, revenue from three years ago have also fallen 16% overall. So unfortunately, we have to acknowledge that the company has not done a great job of growing revenue over that time.
Comparing that to the industry, which is predicted to deliver 8.0% growth in the next 12 months, the company's downward momentum based on recent medium-term revenue results is a sobering picture.
In light of this, it's somewhat alarming that Link-Asia International MedTech Group's P/S sits in line with the majority of other companies. 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. Only the boldest would assume these prices are sustainable as a continuation of recent revenue trends is likely to weigh on the share price eventually.
The Final Word
With its share price dropping off a cliff, the P/S for Link-Asia International MedTech Group looks to be in line with the rest of the Electronic industry. 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.
We find it unexpected that Link-Asia International MedTech Group trades at a P/S ratio that is comparable to the rest of the industry, despite experiencing declining revenues during the medium-term, while the industry as a whole is expected 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. Unless the the circumstances surrounding the recent medium-term improve, it wouldn't be wrong to expect a a difficult period ahead for the company's shareholders.
There are also other vital risk factors to consider and we've discovered 3 warning signs for Link-Asia International MedTech Group (1 is concerning!) that you should be aware of before investing here.
Of course, profitable companies with a history of great earnings growth are generally safer bets. So you may wish to see this free collection of other companies that have reasonable P/E ratios and have grown earnings strongly.
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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.