Little excitement surrounding Jin Tong Ling Technology Group Co., Ltd.’s earnings. (SZSE:300091), as shares rise 27%

Jin Tong Ling Technology Group Co., Ltd. (SZSE:300091) Shareholders who were waiting for something to happen have taken a hit in the past month with the share price falling 27%. Instead of being rewarded, shareholders who have already held on to their shares over the past twelve months are now down 48%.

After the heavy price drop, Jin Tong Ling Technology Group can currently send buy signals with a price-to-sales ratio (or “P/S”) of 1.8x, as almost half of all companies in the machinery industry in China have price-to-earnings ratios of more than 2.6x and even a price-to-earnings ratio of more than 5x is not uncommon. However, the P/S may be low for a reason and further research is needed to determine if this is justified.

Check out our latest analysis for Jin Tong Ling Technology Group

ps-multiple-vs-industry
SZSE:300091 Price-to-sales ratio versus industry April 21, 2024

How Jin Tong Ling Technology Group has performed

For example, consider that Jin Tong Ling Technology Group’s financial performance has been poor recently as sales have declined. It may be that many expect the disappointing revenue performance to continue or accelerate, which has suppressed the price-to-earnings ratio. If you like the company, you hope you don’t, so you can potentially pick up some shares while it’s out of favor.

We don’t have analyst forecasts, but you can see how recent trends are setting the company up for the future through our free report on Jin Tong Ling Technology Group’s earnings, revenue and cash flow.

Do the revenue forecasts match the low price-earnings ratio?

There is an inherent assumption that a company must underperform the industry for P/S ratios like Jin Tong Ling Technology Group’s to be considered reasonable.

Retrospectively, the past year saw a frustrating 6.6% decline in the company’s revenue. This has completely wiped out the profits of the past three years, with virtually no change in turnover in total. So it seems to us that the company has had a mixed performance in terms of growing revenue over that time.

Comparing that to the industry, which is expected to grow 24% over the next twelve months, the company’s momentum is weaker based on recent annualized revenue results over the medium term.

In light of this, it’s understandable that Jin Tong Ling Technology Group’s P/S is below the majority of other companies. Apparently, many shareholders felt uncomfortable sticking with something they believe will continue to follow the broader industry.

The most important takeaway

Jin Tong Ling Technology Group’s price-to-earnings ratio has fallen along with its stock price. It is argued that the price-to-sales ratio is an inferior measure of value within certain sectors, but it can be a powerful indicator of business confidence.

As we suspected, our research of Jin Tong Ling Technology Group found that three-year revenue trends are contributing to the low P/S, as they look worse than current industry expectations. At this point, shareholders accept the low price-to-earnings ratio, as they admit that future earnings are unlikely to deliver any pleasant surprises. Unless recent conditions improve over the medium term, they will continue to be a barrier to the share price around these levels.

It is always necessary to consider the ever-present specter of investment risk. We have identified it 2 warning signs at Jin Tong Ling Technology Groupand understanding this should be part of your investment process.

If companies with solid past earnings growth are for youyou might want to see this free collection of other companies with strong earnings growth and low price/earnings ratios.

Valuation is complex, but we help make it simple.

Invent or Jin Tong Ling Technology Group may be over or undervalued if you look at our comprehensive analysis, including fair value estimates, risks and cautions, dividends, insider transactions and financial health.

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This article from Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts using only an unbiased methodology and our articles are not intended as financial advice. It is not a recommendation to buy or sell any stock and does not take into account your objectives or financial situation. We aim to provide you with targeted, long-term analysis based on fundamental data. Please note that our analysis may not take into account the latest price-sensitive company announcements or quality material. Simply Wall St has no positions in the stocks mentioned.