Some Confidence Is Lacking In Shirble Department Store Holdings (China) Limited (HKG:312) As Shares Slide 26%

To the annoyance of some shareholders, Shirble Department Store Holdings (China) Limited (HKG:312) shares are down a considerable 26% in the last month, which continues a horrid run for the company. For any long-term shareholders, the last month ends a year to forget by locking in a 60% share price decline.

Even after such a large drop in price, there still wouldn't be many who think Shirble Department Store Holdings (China)'s price-to-sales (or "P/S") ratio of 0.3x is worth a mention when the median P/S in Hong Kong's Multiline Retail 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 Shirble Department Store Holdings (China)

What Does Shirble Department Store Holdings (China)'s Recent Performance Look Like?

For example, consider that Shirble Department Store Holdings (China)'s 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 Shirble Department Store Holdings (China), take a look at this free data-rich visualisation to see how the company stacks up on earnings, revenue and cash flow.

Is There Some Revenue Growth Forecasted For Shirble Department Store Holdings (China)?

There's an inherent assumption that a company should be matching the industry for P/S ratios like Shirble Department Store Holdings (China)'s to be considered reasonable.

Retrospectively, the last year delivered a frustrating 3.5% decrease to the company's top line. This means it has also seen a slide in revenue over the longer-term as revenue is down 59% in total over the last three years. 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 10% growth in the next 12 months, the company's downward momentum based on recent medium-term revenue results is a sobering picture.

With this in mind, we find it worrying that Shirble Department Store Holdings (China)'s P/S exceeds that of its industry peers. 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 Bottom Line On Shirble Department Store Holdings (China)'s P/S

Shirble Department Store Holdings (China)'s 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.

We find it unexpected that Shirble Department Store Holdings (China) trades at a P/S ratio that is comparable to the rest of the industry, despite experiencing declining revenues during the medium-term, while the industry as a whole is expected to grow. Even though it matches the industry, we're uncomfortable with the current P/S ratio, as this dismal revenue performance is unlikely to support a more positive sentiment for long. 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.

Having said that, be aware Shirble Department Store Holdings (China) is showing 3 warning signs in our investment analysis, you should know about.

If you're unsure about the strength of Shirble Department Store Holdings (China)'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.