Yahoo Finance Revenues Working Against Baylin Technologies Inc.'s (TSE:BYL) Share Price
Baylin Technologies Inc.'s (TSE:BYL) price-to-sales (or "P/S") ratio of 0.2x might make it look like a strong buy right now compared to the Electronic industry in Canada, where around half of the companies have P/S ratios above 2.4x and even P/S above 10x are quite common. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the highly reduced P/S.
See our latest analysis for Baylin Technologies
What Does Baylin Technologies' Recent Performance Look Like?
Baylin Technologies could be doing better as its revenue has been going backwards lately while most other companies have been seeing positive revenue growth. It seems that many are expecting the poor revenue performance to persist, which has repressed the P/S ratio. If you still like the company, you'd be hoping this isn't the case so that you could potentially pick up some stock while it's out of favour.
Want the full picture on analyst estimates for the company? Then our free report on Baylin Technologies will help you uncover what's on the horizon.
Is There Any Revenue Growth Forecasted For Baylin Technologies?
In order to justify its P/S ratio, Baylin Technologies would need to produce anemic growth that's substantially trailing the industry.
Retrospectively, the last year delivered a frustrating 12% 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 16% in total over the last three years. Accordingly, shareholders would have felt downbeat about the medium-term rates of revenue growth.
Looking ahead now, revenue is anticipated to slump, contracting by 1.1% during the coming year according to the dual analysts following the company. With the industry predicted to deliver 7.6% growth, that's a disappointing outcome.
With this information, we are not surprised that Baylin Technologies is trading at a P/S lower than the industry. However, shrinking revenues are unlikely to lead to a stable P/S over the longer term. There's potential for the P/S to fall to even lower levels if the company doesn't improve its top-line growth.
What We Can Learn From Baylin Technologies' P/S?
Generally, our preference is to limit the use of the price-to-sales ratio to establishing what the market thinks about the overall health of a company.
As we suspected, our examination of Baylin Technologies' analyst forecasts revealed that its outlook for shrinking revenue is contributing to its low P/S. As other companies in the industry are forecasting revenue growth, Baylin Technologies' poor outlook justifies its low P/S ratio. Unless there's material change, it's hard to envision a situation where the stock price will rise drastically.
And what about other risks? Every company has them, and we've spotted 4 warning signs for Baylin Technologies (of which 2 are a bit unpleasant!) you should know about.
Of course, profitable companies with a history of great earnings growth are generally safer bets. So you may wish to see this free collection of other companies that have reasonable P/E ratios and have grown earnings strongly.
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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.
