Asiaray Media Group Limited's (HKG:1993) 29% Share Price Plunge Could Signal Some Risk

The Asiaray Media Group Limited (HKG:1993) share price has softened a substantial 29% over the previous 30 days, handing back much of the gains the stock has made lately. Instead of being rewarded, shareholders who have already held through the last twelve months are now sitting on a 40% share price drop.

In spite of the heavy fall in price, you could still be forgiven for feeling indifferent about Asiaray Media Group's P/S ratio of 0.3x, since the median price-to-sales (or "P/S") ratio for the Media industry in Hong Kong is also close to 0.8x. 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.

Check out our latest analysis for Asiaray Media Group

How Asiaray Media Group Has Been Performing

For instance, Asiaray Media Group's 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.

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 Asiaray Media Group's earnings, revenue and cash flow.

How Is Asiaray Media Group's Revenue Growth Trending?

There's an inherent assumption that a company should be matching the industry for P/S ratios like Asiaray Media Group's 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 2.7%. This has soured the latest three-year period, which nevertheless managed to deliver a decent 23% overall rise in revenue. Although it's been a bumpy ride, it's still fair to say the revenue growth recently has been mostly respectable for the company.

Comparing the recent medium-term revenue trends against the industry's one-year growth forecast of 11% shows it's noticeably less attractive.

With this in mind, we find it intriguing that Asiaray Media Group's P/S is comparable to that of its industry peers. It seems most investors are ignoring the fairly limited recent growth rates and are willing to pay up for exposure to the stock. Maintaining these prices will be difficult to achieve as a continuation of recent revenue trends is likely to weigh down the shares eventually.

The Final Word

Following Asiaray Media Group's share price tumble, its P/S is just clinging on to the industry median P/S. 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.

We've established that Asiaray Media Group's average P/S is a bit surprising since its recent three-year growth is lower than the wider industry forecast. Right now we are uncomfortable with the P/S as this revenue performance isn't likely to support a more positive sentiment for long. Unless the recent medium-term conditions improve, it's hard to accept the current share price as fair value.

Before you take the next step, you should know about the 3 warning signs for Asiaray Media Group (1 shouldn't be ignored!) that we have uncovered.

If you're unsure about the strength of Asiaray 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.

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