Revenues Working Against Wanda Film Holding Co., Ltd.'s (SZSE:002739) Share Price

You may think that with a price-to-sales (or "P/S") ratio of 1.9x Wanda Film Holding Co., Ltd. (SZSE:002739) is definitely a stock worth checking out, seeing as almost half of all the Entertainment companies in China have P/S ratios greater than 5.6x and even P/S above 9x aren't out of the ordinary. However, the P/S might be quite low for a reason and it requires further investigation to determine if it's justified.

Check out our latest analysis for Wanda Film Holding

How Has Wanda Film Holding Performed Recently?

With revenue growth that's superior to most other companies of late, Wanda Film Holding has been doing relatively well. Perhaps the market is expecting future revenue performance to dive, which has kept the P/S suppressed. If not, then existing shareholders have reason to be quite optimistic about the future direction of the share price.

Want the full picture on analyst estimates for the company? Then our free report on Wanda Film Holding will help you uncover what's on the horizon.

Do Revenue Forecasts Match The Low P/S Ratio?

Wanda Film Holding'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.

If we review the last year of revenue growth, the company posted a terrific increase of 47%. Pleasingly, revenue has also lifted 60% in aggregate from three years ago, thanks to the last 12 months of growth. Therefore, it's fair to say the revenue growth recently has been superb for the company.

Looking ahead now, revenue is anticipated to climb by 13% during the coming year according to the ten analysts following the company. Meanwhile, the rest of the industry is forecast to expand by 26%, which is noticeably more attractive.

With this information, we can see why Wanda Film Holding is trading at a P/S lower than the industry. Apparently many shareholders weren't comfortable holding on while the company is potentially eyeing a less prosperous future.

What We Can Learn From Wanda Film Holding's P/S?

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.

We've established that Wanda Film Holding maintains its low P/S on the weakness of its forecast growth being lower than the wider industry, as expected. Right now shareholders are accepting the low P/S as they concede future revenue probably won't provide any pleasant surprises. It's hard to see the share price rising strongly in the near future under these circumstances.

The company's balance sheet is another key area for risk analysis. Our free balance sheet analysis for Wanda Film Holding with six simple checks will allow you to discover any risks that could be an issue.

If these risks are making you reconsider your opinion on Wanda Film Holding, 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.

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