CT Vision S.L. (International) Holdings Limited's (HKG:994) Popularity With Investors Under Threat As Stock Sinks 35%

To the annoyance of some shareholders, CT Vision S.L. (International) Holdings Limited (HKG:994) shares are down a considerable 35% in the last month, which continues a horrid run for the company. The recent drop completes a disastrous twelve months for shareholders, who are sitting on a 73% loss during that time.

Although its price has dipped substantially, there still wouldn't be many who think CT Vision S.L. (International) Holdings' price-to-sales (or "P/S") ratio of 0.3x is worth a mention when the median P/S in Hong Kong's Construction industry is similar at about 0.2x. Although, it's not wise to simply ignore the P/S without explanation as investors may be disregarding a distinct opportunity or a costly mistake.

See our latest analysis for CT Vision S.L. (International) Holdings

How Has CT Vision S.L. (International) Holdings Performed Recently?

For example, consider that CT Vision S.L. (International) Holdings' financial performance has been pretty ordinary lately as revenue growth is non-existent. One possibility is that the P/S is moderate because investors think this benign revenue growth rate might not be enough to outperform the broader industry in the near future. Those who are bullish on CT Vision S.L. (International) Holdings will be hoping that this isn't the case, so that they can pick up the stock at a lower valuation.

We don't have analyst forecasts, but you can see how recent trends are setting up the company for the future by checking out our free report on CT Vision S.L. (International) Holdings' earnings, revenue and cash flow.

How Is CT Vision S.L. (International) Holdings' Revenue Growth Trending?

The only time you'd be comfortable seeing a P/S like CT Vision S.L. (International) Holdings' is when the company's growth is tracking the industry closely.

If we review the last year of revenue, the company posted a result that saw barely any deviation from a year ago. Fortunately, a few good years before that means that it was still able to grow revenue by 7.8% in total over the last three years. Therefore, it's fair to say that revenue growth has been inconsistent recently for the company.

This is in contrast to the rest of the industry, which is expected to grow by 10% over the next year, materially higher than the company's recent medium-term annualised growth rates.

With this in mind, we find it intriguing that CT Vision S.L. (International) Holdings' P/S is comparable to that of its industry peers. Apparently many investors in the company are less bearish than recent times would indicate and aren't willing to let go of their stock right now. Maintaining these prices will be difficult to achieve as a continuation of recent revenue trends is likely to weigh down the shares eventually.

The Bottom Line On CT Vision S.L. (International) Holdings' P/S

Following CT Vision S.L. (International) Holdings' share price tumble, its P/S is just clinging on to the industry median 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 CT Vision S.L. (International) Holdings' average P/S is a bit surprising since its recent three-year growth is lower than the wider industry forecast. When we see weak revenue with slower than industry growth, we suspect the share price is at risk of declining, bringing the P/S back in line with expectations. If recent medium-term revenue trends continue, the probability of a share price decline will become quite substantial, placing shareholders at risk.

Don't forget that there may be other risks. For instance, we've identified 3 warning signs for CT Vision S.L. (International) Holdings (1 makes us a bit uncomfortable) you should be aware of.

If you're unsure about the strength of CT Vision S.L. (International) Holdings' 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.