Dr. Peng Telecom & Media Group Co., Ltd. (SHSE:600804) Stock's 46% Dive Might Signal An Opportunity But It Requires Some Scrutiny

Unfortunately for some shareholders, the Dr. Peng Telecom & Media Group Co., Ltd. (SHSE:600804) share price has dived 46% in the last thirty days, prolonging recent pain. The recent drop completes a disastrous twelve months for shareholders, who are sitting on a 81% loss during that time.

After such a large drop in price, Dr. Peng Telecom & Media Group may be sending very bullish signals at the moment with its price-to-sales (or "P/S") ratio of 0.8x, since almost half of all companies in the Telecom industry in China have P/S ratios greater than 3.1x and even P/S higher than 6x are not unusual. However, the P/S might be quite low for a reason and it requires further investigation to determine if it's justified.

See our latest analysis for Dr. Peng Telecom & Media Group

What Does Dr. Peng Telecom & Media Group's Recent Performance Look Like?

Dr. Peng Telecom & Media Group could be doing better as its revenue has been going backwards lately while most other companies have been seeing positive revenue growth. The P/S ratio is probably low because investors think this poor revenue performance isn't going to get any better. If this is the case, then existing shareholders will probably struggle to get excited about the future direction of the share price.

Keen to find out how analysts think Dr. Peng Telecom & Media Group's future stacks up against the industry? In that case, our free report is a great place to start.

How Is Dr. Peng Telecom & Media Group's Revenue Growth Trending?

The only time you'd be truly comfortable seeing a P/S as depressed as Dr. Peng Telecom & Media Group's is when the company's growth is on track to lag the industry decidedly.

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 42%. The last three years don't look nice either as the company has shrunk revenue by 57% in aggregate. Accordingly, shareholders would have felt downbeat about the medium-term rates of revenue growth.

Turning to the outlook, the next year should generate growth of 80% as estimated by the lone analyst watching the company. Meanwhile, the rest of the industry is forecast to only expand by 4.6%, which is noticeably less attractive.

With this information, we find it odd that Dr. Peng Telecom & Media Group is trading at a P/S lower than the industry. It looks like most investors are not convinced at all that the company can achieve future growth expectations.

The Bottom Line On Dr. Peng Telecom & Media Group's P/S

Shares in Dr. Peng Telecom & Media Group have plummeted and its P/S has followed suit. Generally, our preference is to limit the use of the price-to-sales ratio to establishing what the market thinks about the overall health of a company.

Dr. Peng Telecom & Media Group's analyst forecasts revealed that its superior revenue outlook isn't contributing to its P/S anywhere near as much as we would have predicted. There could be some major risk factors that are placing downward pressure on the P/S ratio. At least price risks look to be very low, but investors seem to think future revenues could see a lot of volatility.

There are also other vital risk factors to consider and we've discovered 2 warning signs for Dr. Peng Telecom & Media Group (1 is significant!) that you should be aware of before investing here.

If you're unsure about the strength of Dr. Peng Telecom & Media Group'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.