Positive Sentiment Still Eludes Worldgate Global Logistics Ltd (HKG:8292) Following 62% Share Price Slump

To the annoyance of some shareholders, Worldgate Global Logistics Ltd (HKG:8292) shares are down a considerable 62% 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 84% share price decline.

In spite of the heavy fall in price, you could still be forgiven for feeling indifferent about Worldgate Global Logistics' P/S ratio of 0.4x, since the median price-to-sales (or "P/S") ratio for the Logistics industry in Hong Kong is also close to 0.3x. While this might not raise any eyebrows, if the P/S ratio is not justified investors could be missing out on a potential opportunity or ignoring looming disappointment.

See our latest analysis for Worldgate Global Logistics

What Does Worldgate Global Logistics' P/S Mean For Shareholders?

Recent times have been quite advantageous for Worldgate Global Logistics as its revenue has been rising very briskly. It might be that many expect the strong revenue performance to wane, which has kept the share price, and thus the P/S ratio, from rising. If that doesn't eventuate, then existing shareholders have reason to be feeling optimistic about the future direction of the share price.

Although there are no analyst estimates available for Worldgate Global Logistics, take a look at this free data-rich visualisation to see how the company stacks up on earnings, revenue and cash flow.

How Is Worldgate Global Logistics' Revenue Growth Trending?

In order to justify its P/S ratio, Worldgate Global Logistics would need to produce growth that's similar to the industry.

Taking a look back first, we see that the company grew revenue by an impressive 51% last year. The latest three year period has also seen an excellent 109% overall rise in revenue, aided by its short-term performance. Accordingly, shareholders would have definitely welcomed those medium-term rates of revenue growth.

This is in contrast to the rest of the industry, which is expected to grow by 13% over the next year, materially lower than the company's recent medium-term annualised growth rates.

With this information, we find it interesting that Worldgate Global Logistics is trading at a fairly similar P/S compared to the industry. It may be that most investors are not convinced the company can maintain its recent growth rates.

The Final Word

With its share price dropping off a cliff, the P/S for Worldgate Global Logistics looks to be in line with the rest of the Logistics industry. Typically, we'd caution against reading too much into price-to-sales ratios when settling on investment decisions, though it can reveal plenty about what other market participants think about the company.

We've established that Worldgate Global Logistics currently trades on a lower than expected P/S since its recent three-year growth is higher than the wider industry forecast. It'd be fair to assume that potential risks the company faces could be the contributing factor to the lower than expected P/S. It appears some are indeed anticipating revenue instability, because the persistence of these recent medium-term conditions would normally provide a boost to the share price.

You should always think about risks. Case in point, we've spotted 3 warning signs for Worldgate Global Logistics you should be aware of, and 1 of them shouldn't be ignored.

If strong companies turning a profit tickle your fancy, then you'll want to check out this free list of interesting companies that trade on a low P/E (but have proven they can grow earnings).

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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.