Yahoo Finance Jadason Enterprises Ltd (SGX:J03) May Have Run Too Fast Too Soon With Recent 38% Price Plummet
Unfortunately for some shareholders, the Jadason Enterprises Ltd (SGX:J03) share price has dived 38% in the last thirty days, prolonging recent pain. The recent drop completes a disastrous twelve months for shareholders, who are sitting on a 75% loss during that time.
Even after such a large drop in price, there still wouldn't be many who think Jadason Enterprises' price-to-sales (or "P/S") ratio of 0.1x is worth a mention when the median P/S in Singapore's Electronic industry is similar at about 0.3x. While this might not raise any eyebrows, if the P/S ratio is not justified investors could be missing out on a potential opportunity or ignoring looming disappointment.
View our latest analysis for Jadason Enterprises
How Has Jadason Enterprises Performed Recently?
As an illustration, revenue has deteriorated at Jadason Enterprises over the last year, which is not ideal at all. 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.
We don't have analyst forecasts, but you can see how recent trends are setting up the company for the future by checking out our free report on Jadason Enterprises' earnings, revenue and cash flow.
How Is Jadason Enterprises' Revenue Growth Trending?
The only time you'd be comfortable seeing a P/S like Jadason Enterprises' is when the company's growth is tracking the industry closely.
Retrospectively, the last year delivered a frustrating 42% 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 33% in total over the last three years. Accordingly, shareholders would have felt downbeat about the medium-term rates of revenue growth.
Weighing that medium-term revenue trajectory against the broader industry's one-year forecast for expansion of 33% shows it's an unpleasant look.
With this information, we find it concerning that Jadason Enterprises is trading at a fairly similar P/S compared to the industry. It seems most investors are ignoring the recent poor growth rate and are hoping for a turnaround in the company's business prospects. 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 Does Jadason Enterprises' P/S Mean For Investors?
Following Jadason Enterprises' share price tumble, its P/S is just clinging on to the industry median P/S. We'd say the price-to-sales ratio's power isn't primarily as a valuation instrument but rather to gauge current investor sentiment and future expectations.
We find it unexpected that Jadason Enterprises trades at a P/S ratio that is comparable to the rest of the industry, despite experiencing declining revenues during the medium-term, while the industry as a whole is expected to grow. Even though it matches the industry, we're uncomfortable with the current P/S ratio, as this dismal revenue performance is unlikely to support a more positive sentiment for long. Unless the recent medium-term conditions improve markedly, investors will have a hard time accepting the share price as fair value.
You should always think about risks. Case in point, we've spotted 3 warning signs for Jadason Enterprises you should be aware of.
If companies with solid past earnings growth is up your alley, you may wish to see this free collection of other companies with strong earnings growth and low P/E ratios.
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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.
