Yahoo Finance Trellidor Holdings Limited's (JSE:TRL) Share Price Is Still Matching Investor Opinion Despite 30% Slump
Trellidor Holdings Limited (JSE:TRL) shareholders that were waiting for something to happen have been dealt a blow with a 30% share price drop in the last month. Instead of being rewarded, shareholders who have already held through the last twelve months are now sitting on a 27% share price drop.
In spite of the heavy fall in price, it's still not a stretch to say that Trellidor Holdings' price-to-sales (or "P/S") ratio of 0.3x right now seems quite "middle-of-the-road" compared to the Building industry in South Africa, where the median P/S ratio is around 0.4x. However, investors might be overlooking a clear opportunity or potential setback if there is no rational basis for the P/S.
View our latest analysis for Trellidor Holdings
How Has Trellidor Holdings Performed Recently?
For example, consider that Trellidor Holdings' financial performance has been poor lately as its revenue has been in decline. Perhaps investors believe the recent revenue performance is enough to keep in line with the industry, which is keeping the P/S from dropping off. 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 Trellidor Holdings will help you shine a light on its historical performance.
What Are Revenue Growth Metrics Telling Us About The P/S?
There's an inherent assumption that a company should be matching the industry for P/S ratios like Trellidor Holdings' to be considered reasonable.
In reviewing the last year of financials, we were disheartened to see the company's revenues fell to the tune of 2.1%. That put a dampener on the good run it was having over the longer-term as its three-year revenue growth is still a noteworthy 19% in total. Although it's been a bumpy ride, it's still fair to say the revenue growth recently has been mostly respectable for the company.
It's interesting to note that the rest of the industry is similarly expected to grow by 4.6% over the next year, which is fairly even with the company's recent medium-term annualised growth rates.
With this in consideration, it's clear to see why Trellidor Holdings' P/S matches up closely to its industry peers. It seems most investors are expecting to see average growth rates continue into the future and are only willing to pay a moderate amount for the stock.
The Key Takeaway
Trellidor 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.
It appears to us that Trellidor Holdings maintains its moderate P/S off the back of its recent three-year growth being in line with the wider industry forecast. Right now shareholders are comfortable with the P/S as they are quite confident future revenue won't throw up any surprises. Unless the recent medium-term conditions change, they will continue to support the share price at these levels.
It is also worth noting that we have found 4 warning signs for Trellidor Holdings that you need to take into consideration.
If strong companies turning a profit tickle your fancy, then you'll want to check out this free list of interesting companies that trade on a low P/E (but have proven they can grow earnings).
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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.
