Investors Give Congyu Intelligent Agricultural Holdings Limited (HKG:875) Shares A 31% Hiding

Unfortunately for some shareholders, the Congyu Intelligent Agricultural Holdings Limited (HKG:875) share price has dived 31% in the last thirty days, prolonging recent pain. For any long-term shareholders, the last month ends a year to forget by locking in a 72% share price decline.

Although its price has dipped substantially, there still wouldn't be many who think Congyu Intelligent Agricultural Holdings' price-to-sales (or "P/S") ratio of 0.4x is worth a mention when the median P/S in Hong Kong's Food industry is similar at about 0.5x. 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.

View our latest analysis for Congyu Intelligent Agricultural Holdings

What Does Congyu Intelligent Agricultural Holdings' Recent Performance Look Like?

For instance, Congyu Intelligent Agricultural Holdings' receding revenue in recent times would have to be some food for thought. Perhaps investors believe the recent revenue performance is enough to keep in line with the industry, which is keeping the P/S from dropping off. If not, then existing shareholders may be a little nervous about the viability of the share price.

Want the full picture on earnings, revenue and cash flow for the company? Then our free report on Congyu Intelligent Agricultural Holdings will help you shine a light on its historical performance.

How Is Congyu Intelligent Agricultural Holdings' Revenue Growth Trending?

There's an inherent assumption that a company should be matching the industry for P/S ratios like Congyu Intelligent Agricultural Holdings' to be considered reasonable.

In reviewing the last year of financials, we were disheartened to see the company's revenues fell to the tune of 62%. That put a dampener on the good run it was having over the longer-term as its three-year revenue growth is still a noteworthy 25% in total. So we can start by confirming that the company has generally done a good job of growing revenue over that time, even though it had some hiccups along the way.

Comparing that to the industry, which is only predicted to deliver 5.3% growth in the next 12 months, the company's momentum is stronger based on recent medium-term annualised revenue results.

In light of this, it's curious that Congyu Intelligent Agricultural Holdings' P/S sits in line with the majority of other companies. It may be that most investors are not convinced the company can maintain its recent growth rates.

The Key Takeaway

Congyu Intelligent Agricultural Holdings' plummeting stock price has brought its P/S back to a similar region as the rest of the industry. It's argued the price-to-sales ratio is an inferior measure of value within certain industries, but it can be a powerful business sentiment indicator.

To our surprise, Congyu Intelligent Agricultural Holdings revealed its three-year revenue trends aren't contributing to its P/S as much as we would have predicted, given they look better than current industry expectations. There could be some unobserved threats to revenue preventing the P/S ratio from matching this positive performance. At least the risk of a price drop looks to be subdued if recent medium-term revenue trends continue, but investors seem to think future revenue could see some volatility.

And what about other risks? Every company has them, and we've spotted 4 warning signs for Congyu Intelligent Agricultural Holdings (of which 1 doesn't sit too well with us!) you should know about.

Of course, profitable companies with a history of great earnings growth are generally safer bets. So you may wish to see this free collection of other companies that have reasonable P/E ratios and have grown earnings strongly.

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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.