Risks Still Elevated At These Prices As Yunhong Green CTI Ltd. (NASDAQ:YHGJ) Shares Dive 31%

Explore Yunhong Green CTI's Fair Values from the Community and select yours

Unfortunately for some shareholders, the Yunhong Green CTI Ltd. (NASDAQ:YHGJ) share price has dived 31% in the last thirty days, prolonging recent pain. Instead of being rewarded, shareholders who have already held through the last twelve months are now sitting on a 32% share price drop.

Although its price has dipped substantially, there still wouldn't be many who think Yunhong Green CTI's price-to-sales (or "P/S") ratio of 0.7x is worth a mention when it essentially matches the median P/S in the United States' Consumer Durables industry. However, investors might be overlooking a clear opportunity or potential setback if there is no rational basis for the P/S.

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Check out our latest analysis for Yunhong Green CTI

What Does Yunhong Green CTI's P/S Mean For Shareholders?

The recent revenue growth at Yunhong Green CTI would have to be considered satisfactory if not spectacular. Perhaps the expectation moving forward is that the revenue growth will track in line with the wider industry for the near term, which has kept the P/S subdued. Those who are bullish on Yunhong Green CTI will be hoping that this isn't the case, so that they can pick up the stock at a lower valuation.

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

Do Revenue Forecasts Match The P/S Ratio?

There's an inherent assumption that a company should be matching the industry for P/S ratios like Yunhong Green CTI's to be considered reasonable.

If we review the last year of revenue growth, the company posted a worthy increase of 5.7%. However, this wasn't enough as the latest three year period has seen an unpleasant 14% overall drop in revenue. Therefore, it's fair to say the revenue growth recently has been undesirable for the company.

In contrast to the company, the rest of the industry is expected to grow by 2.4% over the next year, which really puts the company's recent medium-term revenue decline into perspective.

With this in mind, we find it worrying that Yunhong Green CTI's P/S exceeds that of its industry peers. It seems most investors are ignoring the recent poor growth rate and are hoping for a turnaround in the company's business prospects. Only the boldest would assume these prices are sustainable as a continuation of recent revenue trends is likely to weigh on the share price eventually.

What We Can Learn From Yunhong Green CTI's P/S?

Following Yunhong Green CTI's share price tumble, its P/S is just clinging on to the industry median P/S. 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.

Our look at Yunhong Green CTI revealed its shrinking revenues over the medium-term haven't impacted the P/S as much as we anticipated, given the industry is set to grow. Even though it matches the industry, we're uncomfortable with the current P/S ratio, as this dismal revenue performance is unlikely to support a more positive sentiment for long. If recent medium-term revenue trends continue, it will place shareholders' investments at risk and potential investors in danger of paying an unnecessary premium.

We don't want to rain on the parade too much, but we did also find 3 warning signs for Yunhong Green CTI (1 doesn't sit too well with us!) that you need to be mindful of.

If companies with solid past earnings growth is up your alley, you may wish to see this free collection of other companies with strong earnings growth and low P/E ratios.

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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.