You get what you pay for with Nova LifeStyle, Inc. (NASDAQ:NVFY) down 28%

Nova Lifestyle Co., Ltd. (NASDAQ:NVFY) stock had a bad month, falling 28%, despite a period of relative strength. The decline over the past 30 days caps off a tough year for shareholders, with the stock price down 47% during that time.

Although the price has dropped significantly, it is no exaggeration to say that Nova LifeStyle’s current price-to-sales (or “P/S”) ratio of 0.3 times is quite “middling” compared to other companies. US consumer durables industry. The median P/S multiple is approximately 0.7x. This may not raise any eyebrows, but if the P/S ratio is not justified, investors may miss out on potential opportunities or ignore impending disappointment.

Check out our latest analysis for Nova LifeStyle.

What does Nova LifeStyle’s P/S mean for shareholders?

As an example, Nova Lifestyle’s earnings have deteriorated over the last 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 you like the company, you’ll at least hope that happens so that you have a chance to buy the stock while it’s not very lucrative.

We don’t have analyst forecasts, but checking our forecasts will tell you how recent trends are setting up the company’s future. free Reports on Nova LifeStyle’s earnings, revenue and cash flow.

What do revenue growth metrics tell you about your bottom line?

Nova LifeStyle’s P/S ratio is typical for a company that is expected to only have moderate growth and, importantly, perform in line with its industry.

When I reviewed last year’s financials, I was disappointed to see that our revenue declined by 17%. In any case, thanks to the growth in the previous quarter, revenue increased by a total of 7.0% compared to his three years ago. So while shareholders would have been hoping for a continuation of the performance, they’re probably more or less happy with the medium-term earnings growth rate.

Interestingly, the rest of the industry is similarly expected to grow by 3.7% next year, which is roughly on par with the company’s recent medium-term annual growth rate.

With this in mind, it’s understandable that Nova LifeStyle’s income statement is on par with most other companies. Most investors expect the average growth rate to continue into the future, and are likely willing to pay only a modest amount for the stock.

Nova LifeStyle P/S Conclusion

With the stock price falling off a cliff, Nova Lifestyle’s earnings appear to be in line with the rest of the consumer durables industry. While we typically caution against reading too much into price-to-sales ratios when making investment decisions, they can reveal a lot about what other market participants think about a company. .

Nova Lifestyle appears to have maintained reasonable earnings, with growth over the last three years being in line with overall industry expectations. Shareholders are confident that the company’s future earnings outlook does not contain any major surprises, as past earnings trends are currently broadly in line with industry expectations. If recent medium-term earnings trends continue, it’s hard to imagine the stock price moving strongly in either direction in the near future under these circumstances.

There are other important risk factors to consider, and we’ve found them. 5 warning signs for Nova LifeStyle (Four is not so good!) Here’s what you need to know before investing.

of course, Profitable companies that have a history of strong revenue growth are generally safer choices..So you might want to see this free A collection of other companies with reasonable P/E ratios and strong earnings growth.

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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.