Transtech Optelecom Science Holdings Limited (HKG:9963) share price soars 35% as investors are less pessimistic than expected

person who has TRANSTECH OPTELCOM SCIENCE HOLDINGS LIMITED. (HKG:9963)’s share price has rebounded 35% in the past 30 days, which should be reassuring, but it should continue to repair the recent damage it has done to investors’ portfolios. Not all shareholders are overjoyed, as the share price is still down 28% in the last 12 months.

Despite the solid price rebound, Transtech Optelecom Science Holdings’ current price to sales (or “P/S”) ratio of 0.4x looks pretty “moderate.” It’s not too much to say. We compare “Roads” to Hong Kong’s telecom industry and believe it is in line with the broader industry’s profit and loss margins. However, it is unwise to simply ignore the income statement without explanation, as investors may be ignoring clear opportunities or costly mistakes.

Check out our latest analysis for Transtech Optelecom Science Holdings.

How has Transtech Optelecom Science Holdings been performing recently?

As an example, Transtech Optelecom Science Holdings’ earnings have deteriorated over the past year, which is not ideal at all. Perhaps many people are hoping that the company will overcome its disappointing earnings performance next fiscal year and prevent a decline in P/S. If this isn’t the case, existing shareholders might be a little worried about the viability of the share price.

There are no analyst forecasts available for Transtech Optelecom Science Holdings, but take a look at this. free Data-rich visualizations show how a company’s profits, revenue, and cash flow stack up.

What are the earnings growth trends for Transtech Optelecom Science Holdings?

To justify its P/S ratio, Transtech Optelecom Science Holdings would need to grow in line with its industry.

When I reviewed last year’s financials, I was disappointed to see that our revenue had declined by 25%. This means that over the long term, earnings are also decreasing, as revenues have declined a total of 34% over the past three years. Therefore, shareholders would have been disappointed with the medium-term earnings growth rate.

The company’s downward momentum based on recent medium-term earnings results is grim compared to an industry expected to grow 48% over the next 12 months.

With this in mind, we are concerned that Transtech Optelecom Science Holdings’ P/L is higher than that of its peers. Apparently, many of the company’s investors are far less bearish than they have been lately, and aren’t willing to exit the stock any time soon. If the P/S drops to a level commensurate with the recent negative growth rate, there’s a good chance existing shareholders are preparing for future disappointment.

What does Transtech Optelecom Science Holdings’ P/S mean for investors?

Transtec Optelecom Science Holdings appears to be returning to popularity with solid price increases, and its P/S is back in line with its peers. In general, our preference is to limit the use of the price-to-sales ratio to establishing what the stock price is. The market considers the overall health of a company.

With the overall industry expected to grow, it is expected that Transtec Optelecom Science Holdings will trade on a P&L margin in line with other companies in the industry, despite declining revenues over the medium term. It was outside. We’re uncomfortable with the current P/S ratio, as this dismal earnings performance is unlikely to support more positive sentiment over the long term, even if it’s in line with the industry. Unless recent medium-term conditions improve significantly, investors will find it difficult to accept the stock’s price as fair value.

Additionally, you should also learn about these 3 warning signs we’ve spotted with Transtech Optelecom Science Holdings (Including two important ones).

If you are… I don’t understand the strength of Transtech Optelecom Science Holdings’ business.Why not explore our interactive list of stocks with solid business fundamentals for other companies you may have missed?

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts using only unbiased methodologies, and articles are not intended to be financial advice. This 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 long-term, focused analysis based on fundamental data. Note that our analysis may not factor in the latest announcements or qualitative material from price-sensitive companies. Simply Wall St has no position in any stocks mentioned.