China Tourism and Culture Investment Group Ltd (SHSE:600358) shareholders who have been waiting for something to happen have been hit with the share price falling 32% in the last month. The recent share price drop caps a disastrous 12 months for shareholders, who have suffered a loss of 55% in that time.
Given that nearly half of the companies in China’s hospitality industry have a price-to-sales (P/S) ratio of over 5.2x, after such a significant drop in price, China Tourism And Culture Investment Group Ltd, with a P/S ratio of 2.3x, can be considered a very attractive investment. However, there may be a reason why the P/S is so low, and further investigation is required to determine whether it is justified.
Check out our latest analysis for China Tourism and Cultural Investment Group Limited
SHSE:600358 Sales Price Ratio by Industry June 6, 2024
SHSE:600358 Sales Price Ratio by Industry June 6, 2024How has China Tourism and Cultural Investment Group performed recently?
For example, China Tourism and Culture Investment Group Co., Ltd.’s recent decline in earnings is thought-provoking. Many are expecting the disappointing earnings performance to continue or accelerate, which may be holding down the stock’s price-to-earnings multiple. Those who are bullish on China Tourism and Culture Investment Group Co., Ltd. are hoping that this is not the case and would be able to buy the stock at a lower valuation.
While we don’t have analyst forecasts, you can see how recent trends could impact the company’s future by checking this free report on China Tourism And Culture Investment GroupLtd’s earnings, revenue and cash flow.
What revenue growth is expected for China Tourism and Cultural Investment Group Co. Ltd?
China Tourism and Culture Investment Group’s P/S ratio is typical of a company that is expected to experience very slow growth or even declining earnings, and more importantly, perform much worse than the wider industry.
Looking back, the company’s sales were down a disappointing 1.6% last year, which led to an overall 11% decline in revenue three years ago, so unfortunately we have to admit that the company hasn’t done much in terms of growing revenue over this period.
Comparing this medium-term revenue trajectory with the industry’s one-year growth forecast of 27% shows an unfavorable outlook.
With this in mind, it’s understandable that China Tourism and Cultural Investment Group’s P/S is lower than the majority of other companies. That said, with earnings trending downwards, there’s no guarantee the P/S has bottomed out yet. If the company doesn’t improve its sales growth, the P/S could fall to even lower levels.
What does China Tourism and Culture Investment Group’s P/S mean for investors?
China Tourism and Culture Investment Group’s stock price, which is on the verge of falling off a cliff, has also seen its P/S ratio fall sharply. The power of the price-to-sales multiple is not primarily as a valuation tool, but rather as a way to gauge current investor sentiment and future expectations.
It’s not surprising to see China Tourism and Cultural Investment Group maintaining a low P/S given that earnings are declining over the medium term. Currently, shareholders are accepting the low P/S, acknowledging that future earnings probably won’t be a pleasant surprise either. Given the current situation, it seems unlikely that the share price will move significantly in either direction in the near future, so long as recent medium term earnings trends continue.
There are many other important risk factors outlined in the company’s balance sheet. Check out our free balance sheet analysis of China Tourism And Culture Investment Group Ltd, which includes six quick checklists to help you understand some of these key factors.
It’s important to find great companies, not just the first idea that comes across. If growing profitability matches your idea of a great company, then take a peek at this free list of interesting companies with strong recent earnings growth (and low P/E ratios).
Valuation is complicated, but we can help make it simple.
Find out whether China Tourism And Culture Investment GroupLtd is overvalued or undervalued by checking our comprehensive analysis, including fair value estimates, risks and warnings, dividends, insider transactions, financial position and more.
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This article by Simply Wall St is of general nature. We provide commentary based on historical data and analyst forecasts using only unbiased methodology, and our articles are not intended as financial advice. It is not a recommendation to buy or sell a stock, and does not take into account your objectives or financial situation. We aim to provide long-term analysis driven by fundamental data. Please note that our analysis may not take into account the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any of the stocks mentioned herein.
