Future FinTech Group Inc.’s ( NASDAQ:FTFT ) price is right, but growth is lacking
When nearly half of the companies operating in the U.S. Diversified Financial industry have price-to-sales (or “P/S”) ratios above 2.2x, consider Future FinTech Group Inc. (NASDAQ:FTFT) as an attractive investment with 0.6x P/S ratio. Nevertheless, we need to dig a little deeper to find out if there is a rational basis for reduced P/S.
See our latest analysis for Future FinTech Group
How has Future FinTech Group performed recently?
The recent past has been quite beneficial for the Future FinTech Group as its revenue has increased very rapidly. One possibility is that the P/S ratio is low because investors believe that this strong earnings growth may actually underperform the broader industry in the near future. If that doesn’t happen, existing shareholders have reason to be quite optimistic about the future direction of the share price.
While there are no analyst estimates available for Future FinTech Group, take a look at this free data-rich visualization to see how the company is doing in terms of earnings, revenues and cash flow.
Is there any revenue growth forecast for the FinTech Group of the future?
There is an inherent assumption that a company should underperform the industry for P/S ratios such as Future FinTech Groups to be considered reasonable.
If we look at the last year of revenue growth, the company had an amazing increase of 183%. Yet revenues have barely risen at all from three years ago overall, which is not ideal. The shareholders would therefore probably not have been overly satisfied with the unstable growth rates in the medium term.
Comparing the latest medium-term revenue trends with the industry’s one-year growth forecast of 12% shows that it is noticeably less attractive.
With this in mind, it is easy to understand why Future FinTech Group’s P/S falls short of the mark set by its industry peers. Apparently, many shareholders were not comfortable holding on to something they believe will continue to trail the broader industry.
The last word
It is argued that the price-to-sales ratio is a poor measure of value within certain industries, but it can be a powerful indicator of business sentiment.
As we suspected, our investigation of Future FinTech Group revealed that its three-year earnings trends are contributing to its low P/S, given they look worse than current industry expectations. At this stage, investors feel that the potential for an improvement in earnings is not great enough to justify a higher P/S ratio. If recent medium-term earnings trends continue, it’s hard to see the share price experiencing a reversal of fortunes anytime soon.
You must always be aware of risks, for example – Future FinTech Group has 2 warning signs we think you should be aware of.
Of course, profitable companies with a history of strong earnings growth are generally safer bets. So you might want to see this free collection of other companies that have reasonable P/E numbers and have grown earnings strongly.
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This article by Simply Wall St is general. We provide commentary based on historical data and analyst forecasts only using an objective methodology, and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell shares, and does not take into account your goals or your financial situation. We aim to provide you with long-term focused analysis driven by fundamental data. Please note that our analysis may not take into account the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any of the stocks mentioned.
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