Founded in 2016, Yatsen Holding Limited (YSG) in Guangzhou, China, is a leading top color cosmetics brand in China in terms of retail sales value. Since its inception, the company has boosted its organic and inorganic growth, making it one of the top players in China's beauty market.
However, shares of YSG have plummeted 93.9% in price over the past year and 67.6% year-to-date.
Increasing geopolitical tensions between the United States and China and concerns over the potential delisting of Chinese ADRs caused investors to adopt a bearish sentiment regarding the stock.
Here is what could shape YSG's performance in the near term:
Non-Compliance with NYSE Listing Rules
This week, YSG received a letter from the NYSE stating that the stock is currently trading below $1, thereby violating the stock exchange's American Depositary Shares listing rules. As per NYSE rule 802.01C, a stock is non-compliant with the listing rules if the average closing prices of the shares are below $1 for 30 consecutive days.
YSG has six months to boost its share prices to above $1 to remain listed on the NYSE. The company announced its plans to monitor the market conditions closely and undertake various measures to remain compliant and avoid potential delisting.
However, the company still runs the risk of potential delisting, given the Chinese government's recent crackdown on foreign listed companies. Despite the latest news on cooperation between the Chinese and U.S. officials to keep China-based stocks listed in the U.S., Jamie Allen, of the Asian Corporate Governance Association, expects the delisting to happen within the next two to three years.
Mixed Growth Prospects
Analysts expect YSG's revenues to decline 39% year-over-year to $136.90 million in its fiscal 2022 first quarter (ended March). Furthermore, the company's revenues are expected to decrease 38.8% year-over-year to $143.96 million in its fiscal second quarter (ending June 30) and 17% year-over-year to $174.44 million in the next quarter. Also, the consensus revenue estimate indicates a 16.1% decline year-over-year in its fiscal year 2022 and a 4% decline from the same period last year in the next year.
The consensus EPS estimate indicates a 22.1% improvement in the about-to-be-reported quarter but a 3.5% decline in the current quarter. In addition, the Street expects the company's EPS to remain negative until at least next year. Nevertheless, YSG's bottom line is expected to improve by 24.4% in the current year and 45.3% in its fiscal 2023.
Mixed Valuation
In terms of forward Price/Sales, YSG is currently trading at 0.58x, which is 53.7% lower than the 1.25x industry average. Its 0.46 forward Price/Book multiple is 84.6% lower than the 2.99 industry average. In addition, the stock's 0.09 forward EV/Sales multiple is 95.2% lower than the 1.80 industry average.
However, YSG's 75.77 forward Price/Cash Flow ratio is 460% higher than the 13.53 industry average. Also, the stock's EV/EBITDA multiple is negative 0.03.
POWR Ratings Reflect Uncertainty
YSG has an overall C rating, which translates to Neutral in our proprietary POWR Ratings system. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.
The stock has a C grade for Momentum and Growth. YSG is currently trading slightly below its 50-day and 200-day moving averages of $1.09 and $3.35, respectively, indicating a downtrend, in sync with the Momentum grade. Also, YSG's trailing-12-month revenues rose 11.6% year-over-year, but its trailing-12-month total assets fell 39.1% over this period, justifying the Growth grade.
Among the 47 stocks in the C-rated Specialty Retailers industry, YSG is ranked #38.
Beyond what I have stated above, view YSG Ratings for Sentiment, Stability, Quality, and Value here.
Bottom Line
Despite being one of the leading cosmetics brands in China, analysts expect the company's revenues to plummet in the near term due to slowing consumer demand amid the resurgence of COVID-19 cases in China and continuing supply chain restrictions. Also, as a potential U.S. delisting threat looms, we think investors should wait until the global economy stabilizes before investing in the stock.
How Does Yatsen Holding (YSG) Stack Up Against its Peers?
While YSG has a C rating in our proprietary rating system, one might want to consider looking at its industry peers, TravelCenters of America LLC (TA) and ODP Corp. (ODP), which have an A (Strong Buy) rating.
Click here to checkout our Retail Industry Report for 2022
What To Do Next?
If you’d like to see more top stocks under $10, then you should check out our free special report:
What gives these stocks the right stuff to become big winners?
First, because they are all low priced companies with explosive growth potential, that excel in key areas of growth, sentiment and momentum.
But even more important is that they are all top Buy rated stocks according to our coveted POWR Ratings system, Yes, that same system where top-rated stocks have averaged a +31.10% annual return.
Click below now to see these 3 exciting stocks which could double (or more!) in the year ahead:
YSG shares were trading at $0.71 per share on Thursday afternoon, down $0.01 (-0.84%). Year-to-date, YSG has declined -66.98%, versus a -6.96% rise in the benchmark S&P 500 index during the same period.
About the Author: Aditi Ganguly
Aditi is an experienced content developer and financial writer who is passionate about helping investors understand the do’s and don'ts of investing. She has a keen interest in the stock market and has a fundamental approach when analyzing equities.
The post Is Yatsen Holding a Buy Under $1? appeared first on StockNews.com