NVC International Holdings Limited (HKG:2222) shareholders would be excited to see that the share price has had a great month, posting a 28% gain and recovering from prior weakness. The last 30 days bring the annual gain to a very sharp 57%.
Although its price has surged higher, you could still be forgiven for feeling indifferent about NVC International Holdings' P/S ratio of 0.3x, since the median price-to-sales (or "P/S") ratio for the Household Products industry in Hong Kong is also close to 0.7x. However, investors might be overlooking a clear opportunity or potential setback if there is no rational basis for the P/S.
What Does NVC International Holdings' P/S Mean For Shareholders?
For instance, NVC International Holdings' receding revenue in recent times would have to be some food for thought. 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 not, then existing shareholders may be a little nervous about the viability of the share price.
Although there are no analyst estimates available for NVC International Holdings, 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, NVC International Holdings would need to produce growth that's similar to the industry.
Retrospectively, the last year delivered a frustrating 14% decrease to the company's top line. This means it has also seen a slide in revenue over the longer-term as revenue is down 34% in total over the last three years. 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 7.4% over the next year, which really puts the company's recent medium-term revenue decline into perspective.
With this in mind, we find it worrying that NVC International Holdings' P/S exceeds that of its industry peers. Apparently many investors in the company are way less bearish than recent times would indicate and aren't willing to let go of their stock right now. 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.
What We Can Learn From NVC International Holdings' P/S?
NVC International Holdings appears to be back in favour with a solid price jump bringing its P/S back in line with other companies in the industry Using the price-to-sales ratio alone to determine if you should sell your stock isn't sensible, however it can be a practical guide to the company's future prospects.
The fact that NVC International 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 the circumstances surrounding the recent medium-term improve, it wouldn't be wrong to expect a a difficult period ahead for the company's shareholders.
You should always think about risks. Case in point, we've spotted 3 warning signs for NVC International Holdings you should be aware of.
It's important to make sure you look for a great company, not just the first idea you come across. So if growing profitability aligns with your idea of a great company, take a peek at this free list of interesting companies with strong recent earnings growth (and a low P/E).
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NVC International Holdings似乎再次受到青睞,股價穩步上漲,使其市銷率與業內其他公司保持一致。僅憑市銷比來確定是否應該出售股票是不明智的,但它可以作爲公司未來前景的實用指南。
NVC International Holdings目前的市銷率與該行業其他公司持平,這一事實令我們感到驚訝,因爲其近期收入在中期內一直在下降,而該行業仍將增長。在行業預測不斷增長的背景下,當我們看到收入倒退時,預計股價可能會下跌,從而使溫和的市銷率走低是有道理的。除非近期中期情況有所改善,否則預計公司股東將面臨艱難時期是沒有錯的。