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Risks Still Elevated At These Prices As HY Energy Group Co.,Ltd (SHSE:600387) Shares Dive 26%
HY Energy Group Co.,Ltd (SHSE:600387) 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 recent drop completes a disastrous twelve months for shareholders, who are sitting on a 59% loss during that time.
Although its price has dipped substantially, you could still be forgiven for feeling indifferent about HY Energy GroupLtd's P/S ratio of 0.9x, since the median price-to-sales (or "P/S") ratio for the Oil and Gas industry in China is also close to 1.2x. While this might not raise any eyebrows, if the P/S ratio is not justified investors could be missing out on a potential opportunity or ignoring looming disappointment.
See our latest analysis for HY Energy GroupLtd
How Has HY Energy GroupLtd Performed Recently?
For example, consider that HY Energy GroupLtd's financial performance has been poor lately as its revenue has been in decline. One possibility is that the P/S is moderate because investors think the company might still do enough to be in line with the broader industry in the near future. If not, then existing shareholders may be a little nervous about the viability of the share price.
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 HY Energy GroupLtd's earnings, revenue and cash flow.Is There Some Revenue Growth Forecasted For HY Energy GroupLtd?
There's an inherent assumption that a company should be matching the industry for P/S ratios like HY Energy GroupLtd's to be considered reasonable.
In reviewing the last year of financials, we were disheartened to see the company's revenues fell to the tune of 64%. As a result, revenue from three years ago have also fallen 82% 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 6.4% shows it's an unpleasant look.
With this information, we find it concerning that HY Energy GroupLtd is trading at a fairly similar P/S compared to the industry. Apparently many investors in the company are way less bearish than recent times would indicate and aren't willing to let go of their stock right now. There's a good chance existing shareholders are setting themselves up for future disappointment if the P/S falls to levels more in line with the recent negative growth rates.
The Key Takeaway
With its share price dropping off a cliff, the P/S for HY Energy GroupLtd looks to be in line with the rest of the Oil and Gas industry. 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.
Our look at HY Energy GroupLtd revealed its shrinking revenues over the medium-term haven't impacted the P/S as much as we anticipated, given 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. Unless the recent medium-term conditions improve markedly, investors will have a hard time accepting the share price as fair value.
There are also other vital risk factors to consider before investing and we've discovered 1 warning sign for HY Energy GroupLtd that you should be aware of.
If these risks are making you reconsider your opinion on HY Energy GroupLtd, explore our interactive list of high quality stocks to get an idea of what else is out there.
Valuation is complex, but we're here to simplify it.
Discover if HY Energy GroupLtd might be undervalued or overvalued with our detailed analysis, featuring fair value estimates, potential risks, dividends, insider trades, and its financial condition.
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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.
About SHSE:600387
HY Energy GroupLtd
Engages in the storage, wholesale and retail of gasoline, diesel, and liquefied gas in China.