Revenues Working Against Monalisa Group CO.,Ltd's (SZSE:002918) Share Price Following 25% Dive

Monalisa Group CO.,Ltd (SZSE:002918) shares have had a horrible month, losing 25% after a relatively good period beforehand. The drop over the last 30 days has capped off a tough year for shareholders, with the share price down 40% in that time.

After such a large drop in price, given about half the companies operating in China's Building industry have price-to-sales ratios (or "P/S") above 1.5x, you may consider Monalisa GroupLtd as an attractive investment with its 0.7x P/S ratio. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the reduced P/S.

Check out our latest analysis for Monalisa GroupLtd

How Has Monalisa GroupLtd Performed Recently?

While the industry has experienced revenue growth lately, Monalisa GroupLtd's revenue has gone into reverse gear, which is not great. The P/S ratio is probably low because investors think this poor revenue performance isn't going to get any better. If this is the case, then existing shareholders will probably struggle to get excited about the future direction of the share price.

Keen to find out how analysts think Monalisa GroupLtd's future stacks up against the industry? In that case, our free report is a great place to start.

Is There Any Revenue Growth Forecasted For Monalisa GroupLtd?

Monalisa GroupLtd's P/S ratio would be typical for a company that's only expected to deliver limited growth, and importantly, perform worse than the industry.

Taking a look back first, the company's revenue growth last year wasn't something to get excited about as it posted a disappointing decline of 10%. At least revenue has managed not to go completely backwards from three years ago in aggregate, thanks to the earlier period of growth. Therefore, it's fair to say that revenue growth has been inconsistent recently for the company.

Turning to the outlook, the next year should generate growth of 9.3% as estimated by the seven analysts watching the company. That's shaping up to be materially lower than the 24% growth forecast for the broader industry.

With this in consideration, its clear as to why Monalisa GroupLtd's P/S is falling short industry peers. It seems most investors are expecting to see limited future growth and are only willing to pay a reduced amount for the stock.

What We Can Learn From Monalisa GroupLtd's P/S?

Monalisa GroupLtd's P/S has taken a dip along with its share price. 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.

As expected, our analysis of Monalisa GroupLtd's analyst forecasts confirms that the company's underwhelming revenue outlook is a major contributor to its low P/S. At this stage investors feel the potential for an improvement in revenue isn't great enough to justify a higher P/S ratio. It's hard to see the share price rising strongly in the near future under these circumstances.

You always need to take note of risks, for example - Monalisa GroupLtd has 1 warning sign we think you should be aware of.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com