Investors Don't See Light At End Of China Ever Grand Financial Leasing Group Co., Ltd.'s (HKG:379) Tunnel And Push Stock Down 44%

China Ever Grand Financial Leasing Group Co., Ltd. (HKG:379) shares have had a horrible month, losing 44% after a relatively good period beforehand. Instead of being rewarded, shareholders who have already held through the last twelve months are now sitting on a 49% share price drop.

After such a large drop in price, China Ever Grand Financial Leasing Group may be sending buy signals at present with its price-to-sales (or "P/S") ratio of 0.9x, considering almost half of all companies in the Diversified Financial industry in Hong Kong have P/S ratios greater than 2x and even P/S higher than 5x 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.

Check out our latest analysis for China Ever Grand Financial Leasing Group

What Does China Ever Grand Financial Leasing Group's Recent Performance Look Like?

China Ever Grand Financial Leasing Group certainly has been doing a great job lately as it's been growing its revenue at a really rapid pace. Perhaps the market is expecting future revenue performance to dwindle, which has kept the P/S suppressed. If that doesn't eventuate, then existing shareholders have reason to be quite optimistic about the future direction of the share price.

Although there are no analyst estimates available for China Ever Grand Financial Leasing Group, 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 China Ever Grand Financial Leasing Group?

China Ever Grand Financial Leasing Group'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 an exceptional 89% gain to the company's top line. Still, revenue has fallen 17% in total from three years ago, which is quite disappointing. So unfortunately, we have to acknowledge that the company has not done a great job of growing revenues over that time.

In contrast to the company, the rest of the industry is expected to grow by 17% over the next year, which really puts the company's recent medium-term revenue decline into perspective.

With this information, we are not surprised that China Ever Grand Financial Leasing Group is trading at a P/S lower than the industry. 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.

What Does China Ever Grand Financial Leasing Group's P/S Mean For Investors?

China Ever Grand Financial Leasing Group's recently weak share price has pulled its P/S back below other Diversified Financial companies. 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 China Ever Grand Financial Leasing Group 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. At this stage investors feel the potential for an improvement in revenue isn't great enough to justify a higher P/S ratio. If recent medium-term revenue trends continue, it's hard to see the share price moving strongly in either direction in the near future under these circumstances.

Before you take the next step, you should know about the 3 warning signs for China Ever Grand Financial Leasing Group that we have uncovered.

If you're unsure about the strength of China Ever Grand Financial Leasing 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.