Investors Don't See Light At End Of Meisheng Cultural & Creative Corp, Ltd.'s (SZSE:002699) Tunnel And Push Stock Down 26%

Unfortunately for some shareholders, the Meisheng Cultural & Creative Corp, Ltd. (SZSE:002699) share price has dived 26% in the last thirty days, prolonging recent pain. For any long-term shareholders, the last month ends a year to forget by locking in a 73% share price decline.

Following the heavy fall in price, when close to half the companies operating in China's Luxury industry have price-to-sales ratios (or "P/S") above 1.6x, you may consider Meisheng Cultural & Creative Corp as an enticing stock to check out with its 0.9x P/S ratio. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's limited.

See our latest analysis for Meisheng Cultural & Creative Corp

How Meisheng Cultural & Creative Corp Has Been Performing

For instance, Meisheng Cultural & Creative Corp's receding revenue in recent times would have to be some food for thought. It might be that many expect the disappointing revenue performance to continue or accelerate, which has repressed the P/S. However, if this doesn't eventuate then existing shareholders may be feeling optimistic about the future direction of the share price.

Although there are no analyst estimates available for Meisheng Cultural & Creative Corp, 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 Low P/S Ratio?

In order to justify its P/S ratio, Meisheng Cultural & Creative Corp would need to produce sluggish growth that's trailing the industry.

Retrospectively, the last year delivered a frustrating 36% decrease to the company's top line. The last three years don't look nice either as the company has shrunk revenue by 26% in aggregate. Accordingly, shareholders would have felt downbeat about the medium-term rates of revenue growth.

Weighing that medium-term revenue trajectory against the broader industry's one-year forecast for expansion of 19% shows it's an unpleasant look.

With this in mind, we understand why Meisheng Cultural & Creative Corp's P/S is lower than most of its industry peers. Nonetheless, there's no guarantee the P/S has reached a floor yet with revenue going in reverse. There's potential for the P/S to fall to even lower levels if the company doesn't improve its top-line growth.

What We Can Learn From Meisheng Cultural & Creative Corp's P/S?

Meisheng Cultural & Creative Corp's P/S has taken a dip along with its share price. Using the price-to-sales ratio alone to determine if you should sell your stock isn't sensible, however it can be a practical guide to the company's future prospects.

It's no surprise that Meisheng Cultural & Creative Corp maintains its low P/S off the back of its sliding revenue over the medium-term. Right now shareholders are accepting the low P/S as they concede future revenue probably won't provide any pleasant surprises either. Given the current circumstances, it seems unlikely that the share price will experience any significant movement in either direction in the near future if recent medium-term revenue trends persist.

And what about other risks? Every company has them, and we've spotted 1 warning sign for Meisheng Cultural & Creative Corp you should know about.

If companies with solid past earnings growth is up your alley, you may wish to see this free collection of other companies with strong earnings growth and low P/E ratios.

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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.