[ad_1]
Shenzhen Tianyuan DIC Information Technology Co., Ltd. (SZSE: 300047) Shareholders are no doubt pleased to see the share price rebound 32% in the last month, although the company is still struggling to make up for its recent losses. Long-term shareholders will be thankful for the share price’s recovery, as it’s nearly flat this year after the recent rally.
Despite the strong price rebound, Shenzhen Tianyuan DIC Information Technology’s price-to-sales ratio (or “P/S”) of 0.8x may still make it look like a strong buy compared to China’s broader software industry, of which approx. Half of the companies have P/E ratios higher than 5.3 times, and even P/E ratios higher than 9 times are common. Still, it’s not wise to just take P/S at face value, as there may be an explanation for why it’s so limited.
See our latest analysis for Shenzhen Tianyuan DIC Information Technology
What is the recent performance of Shenzhen Tianyuan DIC Information Technology?
Shenzhen Tianyuan DIC Information Technology has performed well recently, with stable revenue growth. One possibility is that the P/E ratio is low because investors believe this impressive revenue growth may actually underperform the industry as a whole in the near future. If you like the company, you’ll wish that wasn’t the case so you could potentially buy some shares if it falls out of favor.
While there are no analyst forecasts available for Shenzhen Tianyuan DIC Information Technology, take a look at this free Data-rich visualizations that understand your company’s profitability, revenue, and cash flow.
What do revenue growth metrics tell us about low price-to-sales ratios?
Shenzhen Tianyuan DIC Information Technology’s P/E ratio is typical for a company that is expected to have very poor growth or even declining revenue, and importantly, its performance is much worse than the industry.
If we look back at last year’s revenue growth, the company’s revenue grew by 13%. The recent solid performance means total revenue has grown 21% over the past three years. So we can start by confirming that the company has actually done a good job growing revenue during that time.
This is in stark contrast to the rest of the industry, which is expected to grow at 33% next year, significantly higher than the company’s recent mid-term annualized growth rate.
With this in mind, it is not difficult to understand why Shenzhen Tianyuan DIC Information Technology’s P/S is lower than the level set by its peers. Clearly, many shareholders are unwilling to hold on to something they believe will continue to lag behind the wider industry.
The P/S bottom line of Shenzhen Tianyuan DIC Information Technology
Even after such strong price movements, Shenzhen Tianyuan DIC Information Technology’s price-to-earnings ratio still lags behind other industries. While the price-to-sales ratio shouldn’t be the deciding factor in whether you buy a stock, it is a fairly effective barometer of revenue expectations.
In line with expectations, Shenzhen Tianyuan Diai Information Technology Co., Ltd. maintained a lower P/E ratio as its growth in the last three years was lower than broader industry forecasts. For now, shareholders are accepting a lower price-to-earnings ratio as they acknowledge that future earnings may not provide any surprises. If recent medium-term revenue trends continue, it’s unlikely that the share price will reverse its fortunes in the short term.
Having said that, please note Shenzhen Tianyuan DIC Information Technology has 3 signs Two of them are worrisome in our investment analysis.
certainly, Profitable companies with a history of huge profitable growth are generally safer bets.So you might want to check this out free A collection of other companies with reasonable price-to-earnings ratios and strong earnings growth.
Valuation is complex, but we’re helping to make it simple.
Find out if Shenzhen Tianyuan DIC Information Technology is potentially overvalued or undervalued by checking out our comprehensive analysis, which includes Fair value estimates, risks and warnings, dividends, insider trading and financial health.
View free analysis
Have feedback on this article? Follow the content? keep in touch Contact us directly. Alternatively, email the editorial team at (at) simplewallst.com.
This article from Simply Wall St is general in nature. We only use unbiased methodologies to provide commentary based on historical data and analyst forecasts, and our articles are not intended to provide financial advice. It does not constitute a recommendation to buy or sell any stock and does not take into account your objectives or your financial situation. Our goal is to provide you with long-term focused analysis driven by fundamental data. Please note that our analysis may not take into account the latest price-sensitive company announcements or qualitative information. Simply Wall St has no position in any of the stocks mentioned.
[ad_2]
Source link