Weimob Inc.'s (HKG:2013) 29% Dip Still Leaving Some Shareholders Feeling Restless Over Its P/SRatio

The Weimob Inc. (HKG:2013) share price has softened a substantial 29% over the previous 30 days, handing back much of the gains the stock has made lately. Looking at the bigger picture, even after this poor month the stock is up 29% in the last year.

Even after such a large drop in price, you could still be forgiven for thinking Weimob is a stock not worth researching with a price-to-sales ratios (or "P/S") of 3.9x, considering almost half the companies in Hong Kong's Software industry have P/S ratios below 2.1x. However, the P/S might be high for a reason and it requires further investigation to determine if it's justified.

See our latest analysis for Weimob

What Does Weimob's P/S Mean For Shareholders?

Weimob hasn't been tracking well recently as its declining revenue compares poorly to other companies, which have seen some growth in their revenues on average. It might be that many expect the dour revenue performance to recover substantially, which has kept the P/S from collapsing. If not, then existing shareholders may be extremely nervous about the viability of the share price.

Keen to find out how analysts think Weimob's future stacks up against the industry? In that case, our free report is a great place to start.

How Is Weimob's Revenue Growth Trending?

The only time you'd be truly comfortable seeing a P/S as high as Weimob's is when the company's growth is on track to outshine the industry.

In reviewing the last year of financials, we were disheartened to see the company's revenues fell to the tune of 12%. This means it has also seen a slide in revenue over the longer-term as revenue is down 4.3% in total over the last three years. So unfortunately, we have to acknowledge that the company has not done a great job of growing revenue over that time.

Looking ahead now, revenue is anticipated to climb by 2.7% during the coming year according to the twelve analysts following the company. That's shaping up to be materially lower than the 24% growth forecast for the broader industry.

With this in consideration, we believe it doesn't make sense that Weimob's P/S is outpacing its industry peers. Apparently many investors in the company are way more bullish than analysts indicate and aren't willing to let go of their stock at any price. Only the boldest would assume these prices are sustainable as this level of revenue growth is likely to weigh heavily on the share price eventually.

What We Can Learn From Weimob's P/S?

Despite the recent share price weakness, Weimob's P/S remains higher than most other companies in the industry. Using the price-to-sales ratio alone to determine if you should sell your stock isn't sensible, however it can be a practical guide to the company's future prospects.

Despite analysts forecasting some poorer-than-industry revenue growth figures for Weimob, this doesn't appear to be impacting the P/S in the slightest. The weakness in the company's revenue estimate doesn't bode well for the elevated P/S, which could take a fall if the revenue sentiment doesn't improve. At these price levels, investors should remain cautious, particularly if things don't improve.

There are also other vital risk factors to consider and we've discovered 4 warning signs for Weimob (1 is a bit unpleasant!) that you should be aware of before investing here.

If you're unsure about the strength of Weimob'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.