Winox Holdings Limited (HKG:6838) shareholders that were waiting for something to happen have been dealt a blow with a 29% share price drop in the last month. For any long-term shareholders, the last month ends a year to forget by locking in a 66% share price decline.
Although its price has dipped substantially, you could still be forgiven for feeling indifferent about Winox Holdings' P/S ratio of 0.2x, since the median price-to-sales (or "P/S") ratio for the Luxury industry in Hong Kong is also close to 0.6x. Although, it's not wise to simply ignore the P/S without explanation as investors may be disregarding a distinct opportunity or a costly mistake.
See our latest analysis for Winox Holdings
What Does Winox Holdings' Recent Performance Look Like?
As an illustration, revenue has deteriorated at Winox Holdings over the last year, which is not ideal at all. One possibility is that the P/S is moderate because investors think the company might still do enough to be in line with the broader industry in the near future. If not, then existing shareholders may be a little nervous about the viability of the share price.
Although there are no analyst estimates available for Winox Holdings, take a look at this free data-rich visualisation to see how the company stacks up on earnings, revenue and cash flow.How Is Winox Holdings' Revenue Growth Trending?
Winox Holdings' P/S ratio would be typical for a company that's only expected to deliver moderate growth, and importantly, perform in line with the industry.
Retrospectively, the last year delivered a frustrating 12% decrease to the company's top line. This means it has also seen a slide in revenue over the longer-term as revenue is down 51% in total over the last three years. Accordingly, shareholders would have felt downbeat about the medium-term rates of revenue growth.
Comparing that to the industry, which is predicted to deliver 27% growth in the next 12 months, the company's downward momentum based on recent medium-term revenue results is a sobering picture.
With this in mind, we find it worrying that Winox Holdings' P/S exceeds that of its industry peers. Apparently many investors in the company are way less bearish than recent times would indicate and aren't willing to let go of their stock right now. 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 Winox Holdings' P/S?
Winox Holdings' plummeting stock price has brought its P/S back to a similar region as the rest of the industry. It's argued the price-to-sales ratio is an inferior measure of value within certain industries, but it can be a powerful business sentiment indicator.
The fact that Winox Holdings currently trades at a P/S on par with the rest of the industry is surprising to us since its recent revenues have been in decline over the medium-term, all while the industry is set to grow. When we see revenue heading backwards in the context of growing industry forecasts, it'd make sense to expect a possible share price decline on the horizon, sending the moderate P/S lower. Unless the the circumstances surrounding the recent medium-term improve, it wouldn't be wrong to expect a a difficult period ahead for the company's shareholders.
There are also other vital risk factors to consider and we've discovered 2 warning signs for Winox Holdings (1 is concerning!) that you should be aware of before investing here.
If you're unsure about the strength of Winox 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.