More Unpleasant Surprises Could Be In Store For Weiye Holdings Limited's (HKG:1570) Shares After Tumbling 50%

Weiye Holdings Limited (HKG:1570) shareholders that were waiting for something to happen have been dealt a blow with a 50% share price drop in the last month. The drop over the last 30 days has capped off a tough year for shareholders, with the share price down 30% in that time.

In spite of the heavy fall in price, you could still be forgiven for feeling indifferent about Weiye Holdings' P/S ratio of 0.9x, since the median price-to-sales (or "P/S") ratio for the Real Estate industry in Hong Kong is also close to 0.7x. While this might not raise any eyebrows, if the P/S ratio is not justified investors could be missing out on a potential opportunity or ignoring looming disappointment.

Check out our latest analysis for Weiye Holdings

What Does Weiye Holdings' Recent Performance Look Like?

For example, consider that Weiye Holdings' financial performance has been poor lately as its revenue has been in decline. It might be that many expect the company to put the disappointing revenue performance behind them over the coming period, which has kept the P/S from falling. If not, then existing shareholders may be a little nervous about the viability of the share price.

Although there are no analyst estimates available for Weiye Holdings, take a look at this free data-rich visualisation to see how the company stacks up on earnings, revenue and cash flow.

Do Revenue Forecasts Match The P/S Ratio?

In order to justify its P/S ratio, Weiye Holdings would need to produce growth that's similar to the industry.

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 80%. As a result, revenue from three years ago have also fallen 90% overall. Therefore, it's fair to say the revenue growth recently has been undesirable for the company.

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

In light of this, it's somewhat alarming that Weiye Holdings' P/S sits in line with the majority of other companies. Apparently many investors in the company are way less bearish than recent times would indicate and aren't willing to let go of their stock right now. Only the boldest would assume these prices are sustainable as a continuation of recent revenue trends is likely to weigh on the share price eventually.

The Final Word

Weiye Holdings' plummeting stock price has brought its P/S back to a similar region as the rest of the industry. 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.

Our look at Weiye Holdings revealed its shrinking revenues over the medium-term haven't impacted the P/S as much as we anticipated, given the industry is set to grow. When we see revenue heading backwards in the context of growing industry forecasts, it'd make sense to expect a possible share price decline on the horizon, sending the moderate P/S lower. Unless the the circumstances surrounding the recent medium-term improve, it wouldn't be wrong to expect a a difficult period ahead for the company's shareholders.

Before you settle on your opinion, we've discovered 4 warning signs for Weiye Holdings (2 are a bit concerning!) that you should be aware of.

If you're unsure about the strength of Weiye 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.