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More Unpleasant Surprises Could Be In Store For USPACE Technology Group Limited's (HKG:1725) Shares After Tumbling 27%
The USPACE Technology Group Limited (HKG:1725) share price has softened a substantial 27% over the previous 30 days, handing back much of the gains the stock has made lately. The recent drop completes a disastrous twelve months for shareholders, who are sitting on a 69% loss during that time.
Even after such a large drop in price, it's still not a stretch to say that USPACE Technology Group's price-to-sales (or "P/S") ratio of 0.8x right now seems quite "middle-of-the-road" compared to the Electronic industry in Hong Kong, where the median P/S ratio is around 0.3x. 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.
View our latest analysis for USPACE Technology Group
What Does USPACE Technology Group's Recent Performance Look Like?
The revenue growth achieved at USPACE Technology Group over the last year would be more than acceptable for most companies. Perhaps the market is expecting future revenue performance to only keep up with the broader industry, which has keeping the P/S in line with expectations. If you like the company, you'd be hoping this isn't the case so that you could potentially pick up some stock while it's not quite in favour.
Want the full picture on earnings, revenue and cash flow for the company? Then our free report on USPACE Technology Group will help you shine a light on its historical performance.Is There Some Revenue Growth Forecasted For USPACE Technology Group?
The only time you'd be comfortable seeing a P/S like USPACE Technology Group's is when the company's growth is tracking the industry closely.
If we review the last year of revenue growth, the company posted a terrific increase of 19%. As a result, it also grew revenue by 12% in total over the last three years. Therefore, it's fair to say the revenue growth recently has been respectable for the company.
Comparing that to the industry, which is predicted to deliver 23% growth in the next 12 months, the company's momentum is weaker, based on recent medium-term annualised revenue results.
With this information, we find it interesting that USPACE Technology Group is trading at a fairly similar P/S compared to the industry. It seems most investors are ignoring the fairly limited recent growth rates and are willing to pay up for exposure to the stock. They may be setting themselves up for future disappointment if the P/S falls to levels more in line with recent growth rates.
The Key Takeaway
Following USPACE Technology Group's share price tumble, its P/S is just clinging on to the industry median P/S. We'd say the price-to-sales ratio's power isn't primarily as a valuation instrument but rather to gauge current investor sentiment and future expectations.
We've established that USPACE Technology 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. If recent medium-term revenue trends continue, the probability of a share price decline will become quite substantial, placing shareholders at risk.
And what about other risks? Every company has them, and we've spotted 4 warning signs for USPACE Technology Group (of which 3 are concerning!) you should know about.
If these risks are making you reconsider your opinion on USPACE Technology Group, explore our interactive list of high quality stocks to get an idea of what else is out there.
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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.
About SEHK:1725
USPACE Technology Group
An investment holding company, provides electronics manufacturing services in the People's Republic of China, the United States, India, South Korea, Austria, Hong Kong, Germany, Vietnam, Australia, and internationally.
Slight with mediocre balance sheet.