To the annoyance of some shareholders, Talkweb Information System Co.,Ltd. (SZSE:002261) shares are down a considerable 26% in the last month, which continues a horrid run for the company. Looking at the bigger picture, even after this poor month the stock is up 45% in the last year.
Although its price has dipped substantially, you could still be forgiven for feeling indifferent about Talkweb Information SystemLtd's P/S ratio of 5.5x, since the median price-to-sales (or "P/S") ratio for the Entertainment industry in China is also close to 6x. 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.
What Does Talkweb Information SystemLtd's P/S Mean For Shareholders?
For example, consider that Talkweb Information SystemLtd's financial performance has been pretty ordinary lately as revenue growth is non-existent. Perhaps the market believes the recent run-of-the-mill revenue performance isn't enough to outperform the industry, which has kept the P/S muted. 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 not quite in favour.
Although there are no analyst estimates available for Talkweb Information SystemLtd, take a look at this free data-rich visualisation to see how the company stacks up on earnings, revenue and cash flow.
Do Revenue Forecasts Match The P/S Ratio?
There's an inherent assumption that a company should be matching the industry for P/S ratios like Talkweb Information SystemLtd's to be considered reasonable.
Taking a look back first, we see that there was hardly any revenue growth to speak of for the company over the past year. Although pleasingly revenue has lifted 89% in aggregate from three years ago, notwithstanding the last 12 months. So while the company has done a solid job in the past, it's somewhat concerning to see revenue growth decline as much as it has.
Comparing that to the industry, which is predicted to deliver 36% growth in the next 12 months, the company's momentum is weaker, based on recent medium-term annualised revenue results.
With this information, we find it interesting that Talkweb Information SystemLtd is trading at a fairly similar P/S compared to the industry. Apparently many investors in the company are less bearish than recent times would indicate and aren't willing to let go of their stock right now. Maintaining these prices will be difficult to achieve as a continuation of recent revenue trends is likely to weigh down the shares eventually.
The Bottom Line On Talkweb Information SystemLtd's P/S
Following Talkweb Information SystemLtd's share price tumble, its P/S is just clinging on to the industry median P/S. 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.
Our examination of Talkweb Information SystemLtd revealed its poor three-year revenue trends aren't resulting in a lower P/S as per our expectations, given they look worse than current industry outlook. When we see weak revenue with slower than industry growth, we suspect the share price is at risk of declining, bringing the P/S back in line with expectations. Unless the recent medium-term conditions improve, it's hard to accept the current share price as fair value.
A lot of potential risks can sit within a company's balance sheet. Take a look at our free balance sheet analysis for Talkweb Information SystemLtd with six simple checks on some of these key factors.
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).
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.
有了这些信息,我们发现有趣的是,与行业相比,Talkweb Information SystemLtd的市销率相当相似。显然,该公司的许多投资者并不像最近所表明的那样看跌,并且不愿意立即放弃股票。维持这些价格将很难实现,因为近期收入趋势的延续最终可能会压低股价。
Talkweb Information SystemLtd 市销率的底线
在Talkweb Information SystemLtd股价暴跌之后,其市销率仅保持在行业中位数水平。通常,在做出投资决策时,我们会谨慎行事,不要过多地解读市售比率,尽管这可以揭示其他市场参与者对公司的看法。
我们对Talkweb Information SystemLtd的审查显示,其糟糕的三年收入趋势并未导致市销率低于我们的预期,因为这些趋势看起来不如当前的行业前景。当我们看到收入疲软,增长慢于行业增长时,我们怀疑股价有下跌的风险,这使市销售率恢复了预期。除非最近的中期状况有所改善,否则很难接受当前的股价作为公允价值。
公司的资产负债表中可能存在许多潜在风险。看看我们对Talkweb Information SystemLtd的免费资产负债表分析,对其中一些关键因素进行了六次简单的检查。