Stock Analysis

More Unpleasant Surprises Could Be In Store For Dasheng Times Cultural Investment Co., Ltd.'s (SHSE:600892) Shares After Tumbling 27%

SHSE:600892
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Dasheng Times Cultural Investment Co., Ltd. (SHSE:600892) shareholders won't be pleased to see that the share price has had a very rough month, dropping 27% and undoing the prior period's positive performance. Instead of being rewarded, shareholders who have already held through the last twelve months are now sitting on a 38% share price drop.

In spite of the heavy fall in price, when almost half of the companies in China's Entertainment industry have price-to-sales ratios (or "P/S") below 7.2x, you may still consider Dasheng Times Cultural Investment as a stock not worth researching with its 11.9x P/S ratio. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the highly elevated P/S.

Check out our latest analysis for Dasheng Times Cultural Investment

ps-multiple-vs-industry
SHSE:600892 Price to Sales Ratio vs Industry December 30th 2024

What Does Dasheng Times Cultural Investment's P/S Mean For Shareholders?

For instance, Dasheng Times Cultural Investment's receding revenue in recent times would have to be some food for thought. Perhaps the market believes the company can do enough to outperform the rest of the industry in the near future, which is keeping the P/S ratio high. However, if this isn't the case, investors might get caught out paying too much for the stock.

Want the full picture on earnings, revenue and cash flow for the company? Then our free report on Dasheng Times Cultural Investment will help you shine a light on its historical performance.

Is There Enough Revenue Growth Forecasted For Dasheng Times Cultural Investment?

There's an inherent assumption that a company should far outperform the industry for P/S ratios like Dasheng Times Cultural Investment's to be considered reasonable.

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 16%. As a result, revenue from three years ago have also fallen 13% 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 24% shows it's an unpleasant look.

With this information, we find it concerning that Dasheng Times Cultural Investment is trading at a P/S higher than the industry. Apparently many investors in the company are way more bullish than recent times would indicate and aren't willing to let go of their stock at any price. There's a very 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 Bottom Line On Dasheng Times Cultural Investment's P/S

Even after such a strong price drop, Dasheng Times Cultural Investment's P/S still exceeds the industry median significantly. 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 examination of Dasheng Times Cultural Investment revealed its shrinking revenue over the medium-term isn't resulting in a P/S as low as we expected, given the industry is set to grow. When we see revenue heading backwards and underperforming the industry forecasts, we feel the possibility of the share price declining is very real, bringing the P/S back into the realm of reasonability. If recent medium-term revenue trends continue, it will place shareholders' investments at significant risk and potential investors in danger of paying an excessive premium.

Many other vital risk factors can be found on the company's balance sheet. You can assess many of the main risks through our free balance sheet analysis for Dasheng Times Cultural Investment with six simple checks.

If these risks are making you reconsider your opinion on Dasheng Times Cultural Investment, 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.