Yunji Inc. ( ) shares have experienced a significant decline of 28% in the past month, continuing a negative trend for the company. This decline marks a 92% decrease in share price for long-term shareholders, making it a year to forget for them.
Despite the drop in price, Yunji's price-to-sales (P/S) ratio of 0.1x may make it appear attractive compared to other companies in the Multiline Retail industry in the United States. Many companies in this industry have P/S ratios above 0.7x, with some even exceeding 3x. However, it is important to consider other factors before making a decision.
One factor to consider is Yunji's recent poor financial performance, particularly the decline in revenue. This could be a reason why the P/S ratio is low, as investors may expect this disappointing revenue trend to continue. However, if you have confidence in the company, this could be an opportunity to buy stock while it is undervalued.
Looking at revenue growth metrics, Yunji's decline in revenue over the past year and three years is evident. Last year, the company experienced a decline of 46% in revenue, and overall revenue has fallen 90% compared to three years ago. In contrast, the rest of the industry is expected to grow by 13% in the next year. These figures explain why Yunji is trading at a lower P/S ratio compared to the industry.
Given the current revenue trends, it is uncertain if the P/S ratio has reached its lowest point. Maintaining the current stock prices could be challenging, as declining revenue is already impacting the shares. However, the P/S ratio can provide insights into revenue expectations.
In conclusion, Yunji's low P/S ratio is influenced by its shrinking revenue over the medium-term, while the industry is projected to grow. Investors may not see enough potential for revenue improvement to justify a higher P/S ratio. Under these circumstances, it is unlikely that the share price will experience significant movement in the near future. It is important to consider other risk factors before making any investment decisions.
If you are reconsidering your opinion on Yunji, it is recommended to explore other options and conduct a comprehensive analysis to determine the company's valuation.
Please note that this article by Simply Wall St is based on historical data and analyst forecasts, and should not be considered as financial advice. It does not take into account individual objectives or financial situations. The analysis aims to provide long-term focused insights driven by fundamental data.