Why Investors Shouldn’t Be Surprised by Future FinTech Group Inc.’s (NASDAQ:FTFT) Low P/S

Future FinTech Group Inc.’s (NASDAQ:FTFT)’s price-to-sales (or “P/S”) ratio of 0.6x might look like a pretty appealing investment opportunity when you consider that close to half of the companies in the U.S. diversified financial industry have P/ S ratio greater than 2.2x. 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 Future FinTech Group has performed

With revenue growth that has been extremely strong recently, Future FinTech Group has done very well. Perhaps the market expects future earnings growth to slow, which has kept the P/S depressed. If that doesn’t happen, existing shareholders have reason to be quite optimistic about the future direction of the share price.

Do you want a full overview of earnings, income and cash flow for the company? So spring free the Future FinTech Group report will help you shed light on its historical performance.

Are the earnings forecasts consistent with the low P/S ratio?

To justify the P/S ratio, Future FinTech Group needs to produce weak growth that trails the industry.

In retrospect, the past year delivered an exceptional 183% gain to the company’s top line. However, the last three-year period has not been so great overall, as it failed to produce any growth at all. 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 10% shows that it is noticeably less attractive.

With this information, we can see why Future FinTech Group is trading at a P/S lower than the industry. It appears that most investors expect to see the recent limited growth rates continue into the future and are only willing to pay a reduced amount for the stock.

What can we learn from future FinTech Groups P/S?

Generally speaking, our preference is to limit the use of the price-to-sales ratio to determining what the market thinks about the overall health of a company.

In line with expectations, Future FinTech Group maintains its low P/S due to the weakness of its past three-year growth which is lower than the broader industry forecast. Right now, shareholders accept the low P/S as they admit that future earnings are unlikely to bring any pleasant surprises. If recent medium-term earnings trends continue, it’s hard to see the share price experiencing a reversal of fortunes anytime soon.

Before you take the next step, you should know about 3 Warning Signs for Future FinTech Group which we have uncovered.

If you are unsure of the strength of Future FinTech Group’s businesswhy not explore our interactive list of stocks with solid business fundamentals for some other companies you may have missed.

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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.