Insufficient Growth At Yanlord Land Group Limited (SGX:Z25) Hampers Share Price

With a price-to-sales (or "P/S") ratio of 0.1x Yanlord Land Group Limited (SGX:Z25) may be sending very bullish signals at the moment, given that almost half of all the Real Estate companies in Singapore have P/S ratios greater than 2.5x and even P/S higher than 5x are not unusual. However, the P/S might be quite low for a reason and it requires further investigation to determine if it's justified.

See our latest analysis for Yanlord Land Group

How Yanlord Land Group Has Been Performing

With revenue growth that's superior to most other companies of late, Yanlord Land Group has been doing relatively well. One possibility is that the P/S ratio is low because investors think this strong revenue performance might be less impressive moving forward. If not, then existing shareholders have reason to be quite optimistic about the future direction of the share price.

Want the full picture on analyst estimates for the company? Then our free report on Yanlord Land Group will help you uncover what's on the horizon.

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

The only time you'd be truly comfortable seeing a P/S as depressed as Yanlord Land Group's is when the company's growth is on track to lag the industry decidedly.

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 73% overall rise in revenue, aided by its short-term performance. Therefore, it's fair to say the revenue growth recently has been superb for the company.

Shifting to the future, estimates from the dual analysts covering the company are not good at all, suggesting revenue should decline by 27% over the next year. Meanwhile, the broader industry is forecast to moderate by 3.6%, which indicates the company should perform poorly indeed.

With this in consideration, it's clear to us why Yanlord Land Group's P/S isn't quite up to scratch with its industry peers. However, when revenue shrink rapidly the P/S often shrinks too, which could set up shareholders for future disappointment. There's potential for the P/S to fall to even lower levels if the company doesn't improve its top-line growth.

The Final Word

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.

As we suspected, our examination of Yanlord Land Group's analyst forecasts revealed that its even shakier outlook against the industry is contributing factor to why its P/S is so low. With such a gloomy outlook, investors feel the potential for an improvement in revenue isn't great enough to justify paying a premium resulting in a higher P/S ratio. Although, we would be concerned whether the company can even maintain this level of performance under these tough industry conditions. In the meantime, unless the company's prospects improve they will continue to form a barrier for the share price around these levels.

Plus, you should also learn about this 1 warning sign we've spotted with Yanlord Land Group.

It's important to make sure you look for a great company, not just the first idea you come across. So if growing profitability aligns with your idea of a great company, take a peek at this free list of interesting companies with strong recent earnings growth (and a low P/E).

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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.