Revenues Working Against Ever Harvest Group Holdings Limited's (HKG:1549) Share Price Following 26% Dive

To the annoyance of some shareholders, Ever Harvest Group Holdings Limited (HKG:1549) shares are down a considerable 26% in the last month, which continues a horrid run for the company. The recent drop completes a disastrous twelve months for shareholders, who are sitting on a 58% loss during that time.

Following the heavy fall in price, Ever Harvest Group Holdings' price-to-sales (or "P/S") ratio of 0.2x might make it look like a buy right now compared to the Shipping industry in Hong Kong, where around half of the companies have P/S ratios above 0.9x and even P/S above 3x are quite common. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's limited.

Check out our latest analysis for Ever Harvest Group Holdings

What Does Ever Harvest Group Holdings' Recent Performance Look Like?

For instance, Ever Harvest Group Holdings' receding revenue in recent times would have to be some food for thought. It might be that many expect the disappointing revenue performance to continue or accelerate, which has repressed the P/S. 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 out of favour.

We don't have analyst forecasts, but you can see how recent trends are setting up the company for the future by checking out our free report on Ever Harvest Group Holdings' earnings, revenue and cash flow.

What Are Revenue Growth Metrics Telling Us About The Low P/S?

In order to justify its P/S ratio, Ever Harvest Group Holdings would need to produce sluggish growth that's trailing the industry.

Retrospectively, the last year delivered a frustrating 27% decrease to the company's top line. As a result, revenue from three years ago have also fallen 3.6% overall. Accordingly, shareholders would have felt downbeat about the medium-term rates of revenue growth.

Comparing that to the industry, which is predicted to deliver 9.0% 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 understandable that Ever Harvest Group Holdings' P/S would sit below the majority of other companies. Nonetheless, there's no guarantee the P/S has reached a floor yet with revenue going in reverse. Even just maintaining these prices could be difficult to achieve as recent revenue trends are already weighing down the shares.

What We Can Learn From Ever Harvest Group Holdings' P/S?

Ever Harvest Group Holdings' P/S has taken a dip along with its share price. Generally, our preference is to limit the use of the price-to-sales ratio to establishing what the market thinks about the overall health of a company.

As we suspected, our examination of Ever Harvest Group Holdings revealed its shrinking revenue over the medium-term is contributing to its low P/S, given the industry is set to grow. Right now shareholders are accepting the low P/S as they concede future revenue probably won't provide any pleasant surprises either. If recent medium-term revenue trends continue, it's hard to see the share price moving strongly in either direction in the near future under these circumstances.

We don't want to rain on the parade too much, but we did also find 3 warning signs for Ever Harvest Group Holdings (1 makes us a bit uncomfortable!) that you need to be mindful of.

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.