Mediocre performance drives 45% price drop of HY Energy Group Co.,Ltd (SHSE:600387)

HY Energy Group Co., Ltd (SHSE:600387) shareholders will not be happy to see that the share price has had a very difficult month, falling 45% and wiping out the positive performance of the previous period. The decline over the past thirty days has capped off a tough year for shareholders, with the share price falling 45% in that time.

Since the price has dropped significantly, you can consider HY Energy Group Ltd as a solid investment opportunity with the price-to-earnings ratio of 0.8x. Although it is not wise to just take the P/S at face value as there may be an explanation as to why it is limited.

See our latest analysis for HY Energy GroupLtd

How has HY Energy GroupLtd performed recently?

To illustrate, sales at HY Energy Group Ltd have deteriorated over the past year, which is not ideal at all. Perhaps the market believes that recent revenue performance is not good enough to keep the sector afloat, causing the price/earnings ratio to suffer. Those bullish on HY Energy GroupLtd will hope this isn’t the case so they can buy the stock at a lower valuation.

While there are no analyst estimates available for HY Energy GroupLtd, check this out free data-rich visualization to see how the company is doing in terms of revenue, revenue and cash flow.

How is HY Energy Group Ltd’s revenue growth?

HY Energy Group Ltd’s price-to-earnings ratio would be typical of a company that is expected to deliver only limited growth and, more importantly, underperform the industry.

When we looked at the financials last year, we were disheartened to see that the company’s revenues were down 66%. The last three years don’t look good either, as the company has shrunk revenue by 58% overall. Therefore, it’s fair to say that revenue growth has been undesirable for the company lately.

In contrast, the rest of the sector is expected to grow 6.5% over the next year, which really puts the company’s recent medium-term revenue decline into perspective.

With this in mind, we understand why HY Energy GroupLtd’s P/S is lower than most peers. However, we think shrinking revenues are unlikely to lead to a stable price-earnings ratio in the longer term, which could save shareholders from future disappointment. It’s possible that the price-to-earnings ratio could fall to an even lower level if the company doesn’t improve its revenue growth.

The most important takeaway

HY Energy Group Ltd’s recent share price weakness has pushed its price/earnings ratio back below that of other oil and gas companies. It’s not wise to use price-to-sales ratio alone to determine whether you should sell your shares, but it can provide a practical guide to the company’s future prospects.

Our research of HY Energy GroupLtd confirms that the company’s shrinking revenue over the past medium term is a key factor in the low price-to-sales ratio as the sector is expected to grow. At this point, shareholders accept the low price-to-earnings ratio, as they admit that future earnings are unlikely to deliver any pleasant surprises either. Given current conditions, it seems unlikely that the share price will see any significant movement in either direction in the near future if recent revenue trends continue over the medium term.

Moreover, you should also learn more about this 1 warning sign we’ve spotted with HY Energy GroupLtd.

If strong companies that make profits interest you, then you’ll definitely want to check this out free list of interesting companies that trade at a low price/earnings (but have proven that they can grow their profits).

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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.