Yanlord Land Group Limited (SGX:Z25) Held Back By Insufficient Growth Even After Shares Climb 29%

Yanlord Land Group Limited (SGX:Z25) shareholders have had their patience rewarded with a 29% share price jump in the last month. The last 30 days bring the annual gain to a very sharp 35%.

Although its price has surged higher, Yanlord Land Group's price-to-sales (or "P/S") ratio of 0.2x might still make it look like a strong buy right now compared to the wider Real Estate industry in Singapore, where around half of the companies have P/S ratios above 2.5x and even P/S above 6x are quite common. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the highly reduced P/S.

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Check out our latest analysis for Yanlord Land Group

What Does Yanlord Land Group's P/S Mean For Shareholders?

Yanlord Land Group could be doing better as its revenue has been going backwards lately while most other companies have been seeing positive revenue growth. The P/S ratio is probably low because investors think this poor revenue performance isn't going to get any better. If you still 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.

Keen to find out how analysts think Yanlord Land Group's future stacks up against the industry? In that case, our free report is a great place to start.

How Is Yanlord Land Group's Revenue Growth Trending?

In order to justify its P/S ratio, Yanlord Land Group would need to produce anemic growth that's substantially trailing the industry.

Retrospectively, the last year delivered a frustrating 16% decrease to the company's top line. At least revenue has managed not to go completely backwards from three years ago in aggregate, thanks to the earlier period of growth. Accordingly, shareholders probably wouldn't have been overly satisfied with the unstable medium-term growth rates.

Turning to the outlook, the next three years should bring plunging returns, with revenue decreasing 18% each year as estimated by the two analysts watching the company. With the rest of the industry predicted to shrink by 0.2% each year, it's a sub-optimal result.

In light of this, it's understandable that Yanlord Land Group's P/S sits below the majority of other companies. However, when revenue shrink rapidly the P/S often shrinks too, which could set up shareholders for future disappointment. Even just maintaining these prices could be difficult to achieve as the weak outlook is already weighing down the shares heavily.

What Does Yanlord Land Group's P/S Mean For Investors?

Yanlord Land Group's recent share price jump still sees fails to bring its P/S alongside the industry median. While the price-to-sales ratio shouldn't be the defining factor in whether you buy a stock or not, it's quite a capable barometer of revenue expectations.

We've established that Yanlord Land Group's P/S is about what we expect, seeing as the P/S and revenue growth forecasts are lower than that of an already struggling industry. 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. Typically when industry conditions are tough, there's a real risk of company revenues sliding further, which is a concern of ours in this case. Given the current circumstances, it's difficult to envision any significant increase in the share price in the near term.

You should always think about risks. Case in point, we've spotted 1 warning sign for Yanlord Land Group you should be aware of.

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.