The Great Harvest Maeta Holdings Limited (HKG:3683) share price has fared very poorly over the last month, falling by a substantial 50%. Instead of being rewarded, shareholders who have already held through the last twelve months are now sitting on a 30% share price drop.
Even after such a large drop in price, there still wouldn't be many who think Great Harvest Maeta Holdings' price-to-sales (or "P/S") ratio of 1x is worth a mention when the median P/S in Hong Kong's Shipping industry is similar at about 1.2x. However, investors might be overlooking a clear opportunity or potential setback if there is no rational basis for the P/S.
See our latest analysis for Great Harvest Maeta Holdings
How Has Great Harvest Maeta Holdings Performed Recently?
For example, consider that Great Harvest Maeta Holdings' financial performance has been poor lately as its revenue has been in decline. It might be that many expect the company to put the disappointing revenue performance behind them over the coming period, which has kept the P/S from falling. If not, then existing shareholders may be a little nervous about the viability of the share price.
Want the full picture on earnings, revenue and cash flow for the company? Then our free report on Great Harvest Maeta Holdings will help you shine a light on its historical performance.How Is Great Harvest Maeta Holdings' Revenue Growth Trending?
In order to justify its P/S ratio, Great Harvest Maeta Holdings would need to produce growth that's similar to the industry.
Taking a look back first, the company's revenue growth last year wasn't something to get excited about as it posted a disappointing decline of 26%. Regardless, revenue has managed to lift by a handy 8.0% in aggregate from three years ago, thanks to the earlier period of growth. Accordingly, while they would have preferred to keep the run going, shareholders would be roughly satisfied with the medium-term rates of revenue growth.
Comparing the recent medium-term revenue trends against the industry's one-year growth forecast of 15% shows it's noticeably less attractive.
With this in mind, we find it intriguing that Great Harvest Maeta Holdings' P/S is comparable to that of its industry peers. It seems most investors are ignoring the fairly limited recent growth rates and are willing to pay up for exposure to the stock. They may be setting themselves up for future disappointment if the P/S falls to levels more in line with recent growth rates.
The Bottom Line On Great Harvest Maeta Holdings' P/S
With its share price dropping off a cliff, the P/S for Great Harvest Maeta Holdings looks to be in line with the rest of the Shipping industry. Generally, our preference is to limit the use of the price-to-sales ratio to establishing what the market thinks about the overall health of a company.
Our examination of Great Harvest Maeta Holdings revealed its poor three-year revenue trends aren't resulting in a lower P/S as per our expectations, given they look worse than current industry outlook. Right now we are uncomfortable with the P/S as this revenue performance isn't likely to support a more positive sentiment for long. Unless the recent medium-term conditions improve, it's hard to accept the current share price as fair value.
Plus, you should also learn about these 3 warning signs we've spotted with Great Harvest Maeta Holdings (including 1 which is a bit concerning).
If you're unsure about the strength of Great Harvest Maeta Holdings' business, why not explore our interactive list of stocks with solid business fundamentals for some other companies you may have missed.
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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.
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