Boer Power Holdings Limited (HKG:1685) shareholders won't be pleased to see that the share price has had a very rough month, dropping 25% and undoing the prior period's positive performance. Instead of being rewarded, shareholders who have already held through the last twelve months are now sitting on a 17% share price drop.
In spite of the heavy fall in price, there still wouldn't be many who think Boer Power Holdings' price-to-sales (or "P/S") ratio of 0.3x is worth a mention when the median P/S in Hong Kong's Electrical industry is similar at about 0.4x. However, investors might be overlooking a clear opportunity or potential setback if there is no rational basis for the P/S.
View our latest analysis for Boer Power Holdings
What Does Boer Power Holdings' Recent Performance Look Like?
The recent revenue growth at Boer Power Holdings would have to be considered satisfactory if not spectacular. One possibility is that the P/S is moderate because investors think this good revenue growth might only be parallel to the broader industry in the near future. Those who are bullish on Boer Power Holdings will be hoping that this isn't the case, so that they can pick up the stock at a lower valuation.
We don't have analyst forecasts, but you can see how recent trends are setting up the company for the future by checking out our free report on Boer Power Holdings' earnings, revenue and cash flow.
Do Revenue Forecasts Match The P/S Ratio?
There's an inherent assumption that a company should be matching the industry for P/S ratios like Boer Power Holdings' to be considered reasonable.
If we review the last year of revenue growth, the company posted a worthy increase of 4.8%. However, this wasn't enough as the latest three year period has seen an unpleasant 24% overall drop in revenue. Therefore, it's fair to say the revenue growth recently has been undesirable for the company.
In contrast to the company, the rest of the industry is expected to grow by 26% over the next year, which really puts the company's recent medium-term revenue decline into perspective.
With this information, we find it concerning that Boer Power Holdings is trading at a fairly similar P/S compared to the industry. It seems most investors are ignoring the recent poor growth rate and are hoping for a turnaround in the company's business prospects. There's a good chance existing shareholders are setting themselves up for future disappointment if the P/S falls to levels more in line with the recent negative growth rates.
The Key Takeaway
Following Boer Power Holdings' share price tumble, its P/S is just clinging on to the industry median P/S. Typically, we'd caution against reading too much into price-to-sales ratios when settling on investment decisions, though it can reveal plenty about what other market participants think about the company.
The fact that Boer Power Holdings currently trades at a P/S on par with the rest of the industry is surprising to us since its recent revenues have been in decline over the medium-term, all while the industry is set to grow. When we see revenue heading backwards in the context of growing industry forecasts, it'd make sense to expect a possible share price decline on the horizon, sending the moderate P/S lower. Unless the recent medium-term conditions improve markedly, investors will have a hard time accepting the share price as fair value.
You need to take note of risks, for example - Boer Power Holdings has 3 warning signs (and 1 which is significant) we think you should know about.
If companies with solid past earnings growth is up your alley, you may wish to see this free collection of other companies with strong earnings growth and low P/E ratios.
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继Boer Power Holdings的股价暴跌之后,其市盈率只是维持在行业中位市盈率上。通常,在做出投资决策时,我们谨慎行事,不要过多地解读市售比率,尽管这可以充分揭示其他市场参与者对公司的看法。
Boer Power Holdings目前的市盈率与该行业其他公司持平,这一事实令我们感到惊讶,因为其最近的收入在中期内一直在下降,而该行业仍将增长。在行业预测不断增长的背景下,当我们看到收入倒退时,预计股价可能下跌,从而使温和的市盈率下降是有道理的。除非最近的中期条件显著改善,否则投资者将很难接受股价作为公允价值。