Yueda Digital Holding's (NASDAQ:YDKG) Stock Retreats 71% But Revenues Haven't Escaped The Attention Of Investors

The Yueda Digital Holding (NASDAQ:YDKG) share price has softened a substantial 71% over the previous 30 days, handing back much of the gains the stock has made lately. To make matters worse, the recent drop has wiped out a year's worth of gains with the share price now back where it started a year ago.

In spite of the heavy fall in price, given around half the companies in the United States' Media industry have price-to-sales ratios (or "P/S") below 1.1x, you may still consider Yueda Digital Holding as a stock to avoid entirely with its 3.2x P/S ratio. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's so lofty.

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Check out our latest analysis for Yueda Digital Holding

How Has Yueda Digital Holding Performed Recently?

Yueda Digital Holding certainly has been doing a great job lately as it's been growing its revenue at a really rapid pace. Perhaps the market is expecting future revenue performance to outperform the wider market, which has seemingly got people interested in the stock. You'd really hope so, otherwise you're paying a pretty hefty price for no particular reason.

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

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

The only time you'd be truly comfortable seeing a P/S as steep as Yueda Digital Holding's is when the company's growth is on track to outshine the industry decidedly.

Taking a look back first, we see that the company's revenues underwent some rampant growth over the last 12 months. Pleasingly, revenue has also lifted 143% in aggregate from three years ago, thanks to the last 12 months of explosive growth. So we can start by confirming that the company has done a great job of growing revenue over that time.

Comparing that to the industry, which is only predicted to deliver 2.1% growth in the next 12 months, the company's momentum is stronger based on recent medium-term annualised revenue results.

With this in consideration, it's not hard to understand why Yueda Digital Holding's P/S is high relative to its industry peers. Presumably shareholders aren't keen to offload something they believe will continue to outmanoeuvre the wider industry.

What We Can Learn From Yueda Digital Holding's P/S?

Even after such a strong price drop, Yueda Digital Holding's P/S still exceeds the industry median significantly. 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.

As we suspected, our examination of Yueda Digital Holding revealed its three-year revenue trends are contributing to its high P/S, given they look better than current industry expectations. At this stage investors feel the potential continued revenue growth in the future is great enough to warrant an inflated P/S. Barring any significant changes to the company's ability to make money, the share price should continue to be propped up.

Don't forget that there may be other risks. For instance, we've identified 3 warning signs for Yueda Digital Holding (2 shouldn't be ignored) you should be aware 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.