Why Investors Shouldn't Be Surprised By China Tourism And Culture Investment Group Co.,Ltd's (SHSE:600358) 32% Share Price Plunge

China Tourism And Culture Investment Group Co.,Ltd (SHSE:600358) shareholders that were waiting for something to happen have been dealt a blow with a 32% share price drop in the last month. The recent drop completes a disastrous twelve months for shareholders, who are sitting on a 55% loss during that time.

After such a large drop in price, given close to half the companies in China's Hospitality industry have price-to-sales ratios (or "P/S") above 5.2x, you may consider China Tourism And Culture Investment GroupLtd as a highly attractive investment with its 2.3x P/S ratio. However, the P/S might be quite low for a reason and it requires further investigation to determine if it's justified.

See our latest analysis for China Tourism And Culture Investment GroupLtd

What Does China Tourism And Culture Investment GroupLtd's Recent Performance Look Like?

For instance, China Tourism And Culture Investment GroupLtd'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. Those who are bullish on China Tourism And Culture Investment GroupLtd will be hoping that this isn't the case so that they can pick up the stock at a lower valuation.

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 China Tourism And Culture Investment GroupLtd's earnings, revenue and cash flow.

Is There Any Revenue Growth Forecasted For China Tourism And Culture Investment GroupLtd?

China Tourism And Culture Investment GroupLtd's P/S ratio would be typical for a company that's expected to deliver very poor growth or even falling revenue, and importantly, perform much worse than the industry.

Retrospectively, the last year delivered a frustrating 1.6% decrease to the company's top line. As a result, revenue from three years ago have also fallen 11% overall. So unfortunately, we have to acknowledge that the company has not done a great job of growing revenue over that time.

Weighing that medium-term revenue trajectory against the broader industry's one-year forecast for expansion of 27% shows it's an unpleasant look.

In light of this, it's understandable that China Tourism And Culture Investment GroupLtd's P/S would sit below the majority of other companies. 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 Does China Tourism And Culture Investment GroupLtd's P/S Mean For Investors?

Having almost fallen off a cliff, China Tourism And Culture Investment GroupLtd's share price has pulled its P/S way down as well. 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.

It's no surprise that China Tourism And Culture Investment GroupLtd 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.

Many other vital risk factors can be found on the company's balance sheet. Take a look at our free balance sheet analysis for China Tourism And Culture Investment GroupLtd with six simple checks on some of these key factors.

It's important to make sure you look for a great company, not just the first idea you come across. So if growing profitability aligns with your idea of a great company, take a peek at this free list of interesting companies with strong recent earnings growth (and a low P/E).

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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.