Ko Yo Chemical (Group) Limited (HKG:827) shareholders are no doubt pleased to see that the share price has bounced 26% in the last month, although it is still struggling to make up recently lost ground. Not all shareholders will be feeling jubilant, since the share price is still down a very disappointing 48% in the last twelve months.
Although its price has surged higher, there still wouldn't be many who think Ko Yo Chemical (Group)'s price-to-sales (or "P/S") ratio of 0.2x is worth a mention when the median P/S in Hong Kong's Chemicals industry is similar at about 0.4x. Although, it's not wise to simply ignore the P/S without explanation as investors may be disregarding a distinct opportunity or a costly mistake.
See our latest analysis for Ko Yo Chemical (Group)
What Does Ko Yo Chemical (Group)'s Recent Performance Look Like?
As an illustration, revenue has deteriorated at Ko Yo Chemical (Group) over the last year, which is not ideal at all. One possibility is that the P/S is moderate because investors think the company might still do enough to be in line with the broader industry in the near future. If you like the company, you'd at least be hoping this is the case so that you could potentially pick up some stock while it's not quite in favour.
Although there are no analyst estimates available for Ko Yo Chemical (Group), take a look at this free data-rich visualisation to see how the company stacks up on earnings, revenue and cash flow.
What Are Revenue Growth Metrics Telling Us About The P/S?
In order to justify its P/S ratio, Ko Yo Chemical (Group) would need to produce growth that's similar to the industry.
In reviewing the last year of financials, we were disheartened to see the company's revenues fell to the tune of 13%. Even so, admirably revenue has lifted 46% in aggregate from three years ago, notwithstanding the last 12 months. Accordingly, while they would have preferred to keep the run going, shareholders would definitely welcome the medium-term rates of revenue growth.
This is in contrast to the rest of the industry, which is expected to grow by 3.4% over the next year, materially lower than the company's recent medium-term annualised growth rates.
With this information, we find it interesting that Ko Yo Chemical (Group) is trading at a fairly similar P/S compared to the industry. It may be that most investors are not convinced the company can maintain its recent growth rates.
The Key Takeaway
Its shares have lifted substantially and now Ko Yo Chemical (Group)'s P/S is back within range of the industry median. Generally, our preference is to limit the use of the price-to-sales ratio to establishing what the market thinks about the overall health of a company.
We didn't quite envision Ko Yo Chemical (Group)'s P/S sitting in line with the wider industry, considering the revenue growth over the last three-year is higher than the current industry outlook. There could be some unobserved threats to revenue preventing the P/S ratio from matching this positive performance. It appears some are indeed anticipating revenue instability, because the persistence of these recent medium-term conditions would normally provide a boost to the share price.
Before you settle on your opinion, we've discovered 2 warning signs for Ko Yo Chemical (Group) that you should be aware of.
If you're unsure about the strength of Ko Yo Chemical (Group)'s business, why not explore our interactive list of stocks with solid business fundamentals for some other companies you may have missed.
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Ko Yo Chemical(集团)有限公司(HKG: 827)股东无疑高兴地看到,股价在上个月反弹了26%,尽管它仍在努力弥补最近的跌势。并非所有股东都会感到欢欣鼓舞,因为股价在过去十二个月中仍然下跌了令人失望的48%。
尽管其价格已经飙升,但当香港化工行业的市盈率中位数约为0.4倍时,仍然没有多少人认为Ko Yo Chemical(集团)0.2倍的市销率(或 “市销率”)值得一提。但是,不加解释地忽略市销率是不明智的,因为投资者可能会忽视一个明显的机会或一个代价高昂的错误。