Global Top E-Commerce Co., Ltd. (SZSE:002640) 27% Price Drop Shows Sentiment Matches Revenues

Unfortunately for some shareholders, Global Top E-Commerce Co., Ltd. (SZSE:002640) share price has fallen 27% in the last thirty days, extending recent problems. The recent decline ends a disastrous twelve months for shareholders, who suffered a 55% loss during that time.

Since its price has dropped significantly, it would be understandable to consider Global Top E-Commerce a stock with good investment prospects, with a price-to-sales (or “P/S”) ratio of 0.4x, considering almost half of the company’s China’s convenience retail industry has P/S ratios above 1.4x. However, the P/S ratio may be low for a reason and requires further investigation to determine whether it is justified.

See our latest analysis for Global Top E-Commerce

What do the profits/profits of the global e-commerce leader mean for shareholders?

For example, consider that Global Top E-Commerce’s financial performance has been poor recently as its revenues have been declining. It may be that many expect the disappointing revenue performance to continue or accelerate, which has muted the P/S. If you like the company, you can hope that you don’t and potentially buy some shares when they are out of favour.

While there are no analyst estimates available for global top e-commerce, take a look at this free a data-rich visualization that allows you to see how your company is performing in terms of profits, revenues and cash flow.

What is the trend of revenue growth of the global leader in the e-commerce industry?

To justify its P/S ratio, the world’s leading e-commerce stock would have to show slow growth that is lagging the industry as a whole.

As we reviewed financial data for the last year, we were disheartened to see that the company’s revenue had dropped to 14%. This means that it has also seen revenue decline in the long term, as revenue has declined by a total of 58% over the last three years. Therefore, shareholders would be negative about the medium-term revenue growth rate.

Comparing this medium-term revenue trajectory to the broader industry’s annual growth forecast of 16% shows that this is an unpleasant sight.

In light of this, it is understandable that P/S Global Top E-Commerce ranks below most other companies. However, there is no guarantee that the P/S ratio has already bottomed out and revenues have reversed. There is the potential for the P/S ratio to fall to an even lower level if the company does not improve its revenue growth.

What can we learn from the best sales/sales results around the world?

The P/S value of Global Top E-Commerce decreased along with the share price. While the price-to-sales ratio shouldn’t be the deciding factor on whether you buy the stock or not, it is quite a useful barometer of earnings expectations.

As we suspected, our study of the world’s most popular e-commerce company shows that declining revenues in the medium term are contributing to a low P/S ratio, given the expected growth of the industry. At this stage, investors believe that the potential for revenue improvement is not large enough to justify a higher P/S ratio. Given the current circumstances, it seems unlikely that the share price will see any significant movement in either direction in the near future if recent medium-term revenue trends continue.

Before you decide on your opinion, we discovered 1 warning sign for World’s Best E-Commerce what you should know.

if you are I am not sure about the strength of the Global Top E-Commerce businessExplore our interactive stock list of other companies with strong business fundamentals you may have missed.

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This article by Simply Wall St is of a general nature. We comment based on historical data and analyst forecasts, using only an unbiased methodology, and our articles are not intended to provide financial advice. It is not a recommendation to buy or sell any stock and does not take into account your objectives or financial situation. Our goal is to provide long-term, focused analysis based on fundamental data. Please note that our analysis may not reflect the latest price-sensitive company announcements or qualitative content. Simply Wall St has no position in any of the stocks mentioned.

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