Not Many Are Piling Into Metro Land Corporation Ltd. (SHSE:600683) Stock Yet As It Plummets 30%

Metro Land Corporation Ltd. (SHSE:600683) shareholders that were waiting for something to happen have been dealt a blow with a 30% share price drop in the last month. The drop over the last 30 days has capped off a tough year for shareholders, with the share price down 15% in that time.

After such a large drop in price, Metro Land's price-to-sales (or "P/S") ratio of 0.3x might make it look like a buy right now compared to the Real Estate industry in China, where around half of the companies have P/S ratios above 1.6x and even P/S above 4x are quite common. However, the P/S might be low for a reason and it requires further investigation to determine if it's justified.

Check out our latest analysis for Metro Land

What Does Metro Land's Recent Performance Look Like?

Recent times have been quite advantageous for Metro Land as its revenue has been rising very briskly. One possibility is that the P/S ratio is low because investors think this strong revenue growth might actually underperform the broader industry in the near future. Those who are bullish on Metro Land will be hoping that this isn't the case, so that they can pick up the stock at a lower valuation.

Although there are no analyst estimates available for Metro Land, take a look at this free data-rich visualisation to see how the company stacks up on earnings, revenue and cash flow.

Is There Any Revenue Growth Forecasted For Metro Land?

There's an inherent assumption that a company should underperform the industry for P/S ratios like Metro Land's to be considered reasonable.

Taking a look back first, we see that the company grew revenue by an impressive 92% last year. The latest three year period has also seen a 20% overall rise in revenue, aided extensively by its short-term performance. Accordingly, shareholders would have probably been satisfied with the medium-term rates of revenue growth.

It's interesting to note that the rest of the industry is similarly expected to grow by 5.4% over the next year, which is fairly even with the company's recent medium-term annualised growth rates.

In light of this, it's peculiar that Metro Land's P/S sits below the majority of other companies. Apparently some shareholders are more bearish than recent times would indicate and have been accepting lower selling prices.

The Key Takeaway

The southerly movements of Metro Land's shares means its P/S is now sitting at a pretty low level. 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.

Our examination of Metro Land revealed its three-year revenue trends looking similar to current industry expectations hasn't given the P/S the boost we expected, given that it's lower than the wider industry P/S, There could be some unobserved threats to revenue preventing the P/S ratio from matching the company's performance. medium-term

We don't want to rain on the parade too much, but we did also find 3 warning signs for Metro Land (2 are significant!) that you need to be mindful of.

If strong companies turning a profit tickle your fancy, then you'll want to check out this free list of interesting companies that trade on a low P/E (but have proven they can grow earnings).

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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.