Paranovus Entertainment: Appealing Valuation Amid 94% Decline, Yet Caution Persists

The Paranovus Entertainment Technology Ltd. (NASDAQ:PAVS) share price has fared very poorly over the last month, falling by a substantial 94%. The recent drop completes a disastrous twelve months for shareholders, who are sitting on a 96% loss during that time.

Following the heavy fall in price, Paranovus Entertainment Technology’s price-to-sales (or “P/S”) ratio of 0.2x might make it look like a buy right now compared to the Personal Products industry in the United States, where around half of the companies have P/S ratios above 1x and even P/S above 4x are quite common. Nonetheless, we’d need to dig a little deeper to determine if there is a rational basis for the reduced P/S.

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See our latest analysis for Paranovus Entertainment Technology

What Does Paranovus Entertainment Technology’s P/S Mean For Shareholders?

Paranovus Entertainment Technology certainly has been doing a great job lately as it’s been growing its revenue at a really rapid pace. One possibility is that the P/S ratio is low because investors think this strong revenue growth might actually underperform the broader industry in the near future. Those who are bullish on Paranovus Entertainment Technology will be hoping that this isn’t the case, so that they can pick up the stock at a lower valuation.

Although there are no analyst estimates available for Paranovus Entertainment Technology, take a look at this free data-rich visualisation to see how the company stacks up on earnings, revenue and cash flow.

How Is Paranovus Entertainment Technology’s Revenue Growth Trending?

Paranovus Entertainment Technology’s P/S ratio would be typical for a company that’s only expected to deliver limited growth, and importantly, perform worse than the industry.

Taking a look back first, we see that the company’s revenues underwent some rampant growth over the last 12 months. However, this wasn’t enough as the latest three year period has seen the company endure a nasty 79% drop in revenue in aggregate. So unfortunately, we have to acknowledge that the company has not done a great job of growing revenues over that time.

Comparing that to the industry, which is predicted to deliver 5.2% growth in the next 12 months, the company’s downward momentum based on recent medium-term revenue results is a sobering picture.

With this information, we are not surprised that Paranovus Entertainment Technology is trading at a P/S lower than the industry. Nonetheless, there’s no guarantee the P/S has reached a floor yet with revenue going in reverse. There’s potential for the P/S to fall to even lower levels if the company doesn’t improve its top-line growth.

The Final Word

The southerly movements of Paranovus Entertainment Technology’s shares means its P/S is now sitting at a pretty low level. It’s argued the price-to-sales ratio is an inferior measure of value within certain industries, but it can be a powerful business sentiment indicator.

It’s no surprise that Paranovus Entertainment Technology maintains its low P/S off the back of its sliding revenue over the medium-term. Right now shareholders are accepting the low P/S as they concede future revenue probably won’t provide any pleasant surprises either. Given the current circumstances, it seems unlikely that the share price will experience any significant movement in either direction in the near future if recent medium-term revenue trends persist.

There are also other vital risk factors to consider before investing and we’ve discovered 2 warning signs for Paranovus Entertainment Technology that you should be aware of.

If strong companies turning a profit tickle your fancy, then you’ll want to check out this free list of interesting companies that trade on a low P/E (but have proven they can grow earnings).

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.