When you see that almost half of the companies in the Chemicals industry in Hong Kong have price-to-sales ratios (or "P/S") below 0.3x, Huabao International Holdings Limited (HKG:336) looks to be giving off some sell signals with its 1.9x P/S ratio. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the elevated P/S.
How Has Huabao International Holdings Performed Recently?
For example, consider that Huabao International Holdings' financial performance has been poor lately as its revenue has been in decline. Perhaps the market believes the company can do enough to outperform the rest of the industry in the near future, which is keeping the P/S ratio high. If not, then existing shareholders may be quite nervous about the viability of the share price.
Although there are no analyst estimates available for Huabao International Holdings, take a look at this free data-rich visualisation to see how the company stacks up on earnings, revenue and cash flow.
How Is Huabao International Holdings' Revenue Growth Trending?
In order to justify its P/S ratio, Huabao International Holdings would need to produce impressive growth in excess of the industry.
Retrospectively, the last year delivered a frustrating 11% 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 9.5% in total over the last three years. Therefore, it's fair to say the revenue growth recently has been undesirable for the company.
Comparing that to the industry, which is predicted to deliver 5.1% growth in the next 12 months, the company's downward momentum based on recent medium-term revenue results is a sobering picture.
In light of this, it's alarming that Huabao International Holdings' P/S sits above the majority of other companies. Apparently many investors in the company are way more bullish than recent times would indicate and aren't willing to let go of their stock at any price. Only the boldest would assume these prices are sustainable as a continuation of recent revenue trends is likely to weigh heavily on the share price eventually.
The Final Word
While the price-to-sales ratio shouldn't be the defining factor in whether you buy a stock or not, it's quite a capable barometer of revenue expectations.
We've established that Huabao International Holdings currently trades on a much higher than expected P/S since its recent revenues have been in decline over the medium-term. When we see revenue heading backwards and underperforming the industry forecasts, we feel the possibility of the share price declining is very real, bringing the P/S back into the realm of reasonability. Unless the recent medium-term conditions improve markedly, investors will have a hard time accepting the share price as fair value.
You should always think about risks. Case in point, we've spotted 2 warning signs for Huabao International Holdings you should be aware of, and 1 of them is potentially serious.
If you're unsure about the strength of Huabao International Holdings' business, why not explore our interactive list of stocks with solid business fundamentals for some other companies you may have missed.
Have feedback on this article? Concerned about the content?Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com. 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.
香港の化学業界の会社のほぼ半数が0.3倍以下の価格売上高比(あるいは「P/S」)を持つのを見ると、Huabao International Holdings Limited(HKG:336)は1.9倍のP/S比率でいくらかの売りのシグナルを発しているようです。 それでも、P/Sが高い理有る基礎があるかどうかを判断するためには、もう少し掘り下げる必要があります。
Huabao International Holdingsの最近のパフォーマンスは?
例えば、Huabao International Holdingsの財務パフォーマンスは最近低迷し、売上高が低下しています。市場は、同社が近い将来に業界の他社を上回るだけのことを行えると信じており、これが高いP/S比率を維持している可能性があります。もしそうでなければ、既存の株主は株価の生存可能性についてかなり不安に思うかもしれません。
Huabao International Holdingsに対して利用可能なアナリストの予想はありませんが、この無料のデータ豊富な視覚化を参照すると、同社の収益、売上高、キャッシュフローがどのように比較されるかを確認できます。
Huabao International Holdingsの売上高の成長はどのように変化していますか?
P/S比率を正当化するためには、Huabao International Holdingsは業界を超えた印象的な成長を生み出す必要があります。
このため、Huabao International HoldingsのP / S比率が他の多くの会社よりも高いことが懸念されます。同社の多くの投資家は、最近の時期を反映しない価格で株式を放出することを望んでおり、株式価格が持続可能なものであると仮定するのは、勇気のあることであり、最近の売上高の傾向の継続は、早晩株価に大きな影響を与えることになるでしょう。
Huabao International Holdingsが最近の中期的な売上高が低迷しているため、現時点で期待よりもはるかに高いP/Sで取引されていることがわかりました。売上高が後退し、産業予測を下回っているとき、株価が下落する可能性が非常に高いため、P/S比率は合理的な範囲に戻ることになります。最近の中期的な状況が著しく改善しない限り、投資家は公正な価値として株価を受け入れることが難しいでしょう。
常にリスクについて考える必要があります。 たとえば、私たちはHuabao International Holdingsの2つの警告サインを見つけました。それらのうちの1つは、潜在的に深刻です。
Huabao International Holdingsの事業の強度について不安を感じている場合は、見逃したかもしれない他のいくつかの企業のための堅牢な事業基盤を持つ株式のインタラクティブなリストを見てみましょう。