Some YingTong Telecommunication Co.,Ltd. (SZSE:002861) Shareholders Look For Exit As Shares Take 26% Pounding

YingTong Telecommunication Co.,Ltd. (SZSE:002861) shareholders won't be pleased to see that the share price has had a very rough month, dropping 26% and undoing the prior period's positive performance. The drop over the last 30 days has capped off a tough year for shareholders, with the share price down 22% in that time.

Although its price has dipped substantially, there still wouldn't be many who think YingTong TelecommunicationLtd's price-to-sales (or "P/S") ratio of 2.4x is worth a mention when the median P/S in China's Electrical industry is similar at about 2.2x. However, investors might be overlooking a clear opportunity or potential setback if there is no rational basis for the P/S.

View our latest analysis for YingTong TelecommunicationLtd

What Does YingTong TelecommunicationLtd's Recent Performance Look Like?

YingTong TelecommunicationLtd has been doing a good job lately as it's been growing revenue at a solid pace. It might be that many expect the respectable revenue performance to wane, which has kept the P/S from rising. 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.

We don't have analyst forecasts, but you can see how recent trends are setting up the company for the future by checking out our free report on YingTong TelecommunicationLtd's earnings, revenue and cash flow.

What Are Revenue Growth Metrics Telling Us About The P/S?

The only time you'd be comfortable seeing a P/S like YingTong TelecommunicationLtd's is when the company's growth is tracking the industry closely.

If we review the last year of revenue growth, the company posted a terrific increase of 16%. Despite this strong recent growth, it's still struggling to catch up as its three-year revenue frustratingly shrank by 31% overall. Therefore, it's fair to say the revenue growth recently has been undesirable for the company.

Comparing that to the industry, which is predicted to deliver 25% growth in the next 12 months, the company's downward momentum based on recent medium-term revenue results is a sobering picture.

With this in mind, we find it worrying that YingTong TelecommunicationLtd's P/S exceeds that of its industry peers. It seems most investors are ignoring the recent poor growth rate and are hoping for a turnaround in the company's business prospects. 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 Bottom Line On YingTong TelecommunicationLtd's P/S

Following YingTong TelecommunicationLtd's share price tumble, its P/S is just clinging on to the industry median P/S. We'd say the price-to-sales ratio's power isn't primarily as a valuation instrument but rather to gauge current investor sentiment and future expectations.

The fact that YingTong TelecommunicationLtd currently trades at a P/S on par with the rest of the industry is surprising to us since its recent revenues have been in decline over the medium-term, all while the industry is set 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. If recent medium-term revenue trends continue, it will place shareholders' investments at risk and potential investors in danger of paying an unnecessary premium.

Don't forget that there may be other risks. For instance, we've identified 4 warning signs for YingTong TelecommunicationLtd (2 don't sit too well with us) you should be aware of.

If these risks are making you reconsider your opinion on YingTong TelecommunicationLtd, explore our interactive list of high quality stocks to get an idea of what else is out there.

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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.