Unfortunately for some shareholders, the Talent Property Group Limited (HKG:760) share price has dived 26% in the last thirty days, prolonging recent pain. For any long-term shareholders, the last month ends a year to forget by locking in a 65% share price decline.
Since its price has dipped substantially, Talent Property Group may be sending buy signals at present with its price-to-sales (or “P/S”) ratio of 0.1x, considering almost half of all companies in the Real Estate industry in Hong Kong have P/S ratios greater than 0.6x and even P/S higher than 3x aren’t out of the ordinary. Nonetheless, we’d need to dig a little deeper to determine if there is a rational basis for the reduced P/S.
How Has Talent Property Group Performed Recently?
Recent times have been quite advantageous for Talent Property Group as its revenue has been rising very briskly. Perhaps the market is expecting future revenue performance to dwindle, which has kept the P/S suppressed. Those who are bullish on Talent Property Group 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 Talent Property Group, take a look at this free data-rich visualisation to see how the company stacks up on earnings, revenue and cash flow.
Is There Any Revenue Growth Forecasted For Talent Property Group?
Talent Property Group’s P/S ratio would be typical for a company that’s only expected to deliver limited growth, and importantly, perform worse than the industry.
Taking a look back first, we see that the company grew revenue by an impressive 83% last year. The strong recent performance means it was also able to grow revenue by 55% in total over the last three years. So we can start by confirming that the company has done a great job of growing revenue over that time.
This is in contrast to the rest of the industry, which is expected to grow by 9.3% over the next year, materially lower than the company’s recent medium-term annualised growth rates.
In light of this, it’s peculiar that Talent Property Group’s P/S sits below the majority of other companies. It looks like most investors are not convinced the company can maintain its recent growth rates.
What We Can Learn From Talent Property Group’s P/S?
Talent Property Group’s P/S has taken a dip along with its share price. Using the price-to-sales ratio alone to determine if you should sell your stock isn’t sensible, however it can be a practical guide to the company’s future prospects.
We’re very surprised to see Talent Property Group currently trading on a much lower than expected P/S since its recent three-year growth is higher than the wider industry forecast. When we see robust revenue growth that outpaces the industry, we presume that there are notable underlying risks to the company’s future performance, which is exerting downward pressure on the P/S ratio. It appears many are indeed anticipating revenue instability, because the persistence of these recent medium-term conditions would normally provide a boost to the share price.
Don’t forget that there may be other risks. For instance, we’ve identified 2 warning signs for Talent Property Group (1 doesn’t sit too well with us) you should be aware of.
Of course, profitable companies with a history of great earnings growth are generally safer bets. So you may wish to see this free collection of other companies that have reasonable P/E ratios and have grown earnings strongly.
Valuation is complex, but we’re helping make it simple.
Find out whether Talent Property Group is potentially over or undervalued by checking out our comprehensive analysis, which includes fair value estimates, risks and warnings, dividends, insider transactions and financial health.
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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.