Bright Real Estate Group Co.,Limited's (SHSE:600708) Share Price Boosted 59% But Its Business Prospects Need A Lift Too

Despite an already strong run, Bright Real Estate Group Co.,Limited (SHSE:600708) shares have been powering on, with a gain of 59% in the last thirty days. Looking back a bit further, it's encouraging to see the stock is up 52% in the last year.

Although its price has surged higher, Bright Real Estate GroupLimited may still be sending buy signals at present with its price-to-sales (or "P/S") ratio of 1.4x, considering almost half of all companies in the Real Estate industry in China have P/S ratios greater than 2.4x and even P/S higher than 6x aren't out of the ordinary. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the reduced P/S.

View our latest analysis for Bright Real Estate GroupLimited

What Does Bright Real Estate GroupLimited's Recent Performance Look Like?

As an illustration, revenue has deteriorated at Bright Real Estate GroupLimited over the last year, which is not ideal at all. One possibility is that the P/S is low because investors think the company won't do enough to avoid underperforming the broader industry in the near future. However, if this doesn't eventuate then existing shareholders may be feeling optimistic about the future direction of the share price.

Want the full picture on earnings, revenue and cash flow for the company? Then our free report on Bright Real Estate GroupLimited will help you shine a light on its historical performance.

Do Revenue Forecasts Match The Low P/S Ratio?

Bright Real Estate GroupLimited's P/S ratio would be typical for a company that's only expected to deliver limited growth, and importantly, perform worse than the industry.

Retrospectively, the last year delivered a frustrating 45% decrease to the company's top line. This means it has also seen a slide in revenue over the longer-term as revenue is down 74% in total over the last three years. 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 13% shows it's an unpleasant look.

With this in mind, we understand why Bright Real Estate GroupLimited's P/S is lower than most of its industry peers. Nonetheless, there's no guarantee the P/S has reached a floor yet with revenue going in reverse. Even just maintaining these prices could be difficult to achieve as recent revenue trends are already weighing down the shares.

The Bottom Line On Bright Real Estate GroupLimited's P/S

Despite Bright Real Estate GroupLimited's share price climbing recently, its P/S still lags most other companies. While the price-to-sales ratio shouldn't be the defining factor in whether you buy a stock or not, it's quite a capable barometer of revenue expectations.

Our examination of Bright Real Estate GroupLimited confirms that the company's shrinking revenue over the past medium-term is a key factor in its low price-to-sales ratio, given the industry is projected to grow. 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.

Don't forget that there may be other risks. For instance, we've identified 2 warning signs for Bright Real Estate GroupLimited that you should be aware of.

If you're unsure about the strength of Bright Real Estate GroupLimited's business, why not explore our interactive list of stocks with solid business fundamentals for some other companies you may have missed.

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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.