Slammed 49% Xuan Wu Cloud Technology Holdings Limited (HKG:2392) Screens Well Here But There Might Be A Catch

Unfortunately for some shareholders, the Xuan Wu Cloud Technology Holdings Limited (HKG:2392) share price has dived 49% 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 74% share price decline.

Since its price has dipped substantially, given about half the companies operating in Hong Kong's Software industry have price-to-sales ratios (or "P/S") above 1.2x, you may consider Xuan Wu Cloud Technology Holdings as an attractive investment with its 0.3x P/S ratio. However, the P/S might be low for a reason and it requires further investigation to determine if it's justified.

See our latest analysis for Xuan Wu Cloud Technology Holdings

What Does Xuan Wu Cloud Technology Holdings' Recent Performance Look Like?

Xuan Wu Cloud Technology Holdings has been doing a good job lately as it's been growing revenue at a solid pace. One possibility is that the P/S is low because investors think this respectable revenue growth might actually underperform the broader industry in the near future. Those who are bullish on Xuan Wu Cloud Technology Holdings will be hoping that this isn't the case, so that they can pick up the stock at a lower valuation.

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

How Is Xuan Wu Cloud Technology Holdings' Revenue Growth Trending?

Xuan Wu Cloud Technology Holdings' P/S ratio would be typical for a company that's only expected to deliver limited growth, and importantly, perform worse than the industry.

If we review the last year of revenue growth, the company posted a terrific increase of 23%. Pleasingly, revenue has also lifted 61% in aggregate from three years ago, thanks to the last 12 months of growth. So we can start by confirming that the company has done a great job of growing revenue over that time.

Comparing that to the industry, which is predicted to deliver 19% growth in the next 12 months, the company's momentum is pretty similar based on recent medium-term annualised revenue results.

With this in consideration, we find it intriguing that Xuan Wu Cloud Technology Holdings' P/S falls short of its industry peers. It may be that most investors are not convinced the company can maintain recent growth rates.

What Does Xuan Wu Cloud Technology Holdings' P/S Mean For Investors?

The southerly movements of Xuan Wu Cloud Technology Holdings' shares means its P/S is now sitting at a pretty low level. 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.

Our examination of Xuan Wu Cloud Technology Holdings revealed its three-year revenue trends looking similar to current industry expectations hasn't given the P/S the boost we expected, given that it's lower than the wider industry P/S, There could be some unobserved threats to revenue preventing the P/S ratio from matching the company's performance. medium-term

You need to take note of risks, for example - Xuan Wu Cloud Technology Holdings has 3 warning signs (and 2 which are a bit unpleasant) we think 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.