Sino-Ocean Group Holding Limited (HKG:3377) shares have had a really impressive month, gaining 113% after a shaky period beforehand.    Unfortunately, the gains of the last month did little to right the losses of the last year with the stock still down 27% over that time.  

Even after such a large jump in price, Sino-Ocean Group Holding may still be sending bullish signals at the moment with its price-to-sales (or "P/S") ratio of 0.1x, since almost half of all companies in the Real Estate industry in Hong Kong have P/S ratios greater than 0.7x and even P/S higher than 3x are not unusual.   However, the P/S might be low for a reason and it requires further investigation to determine if it's justified.  

Check out our latest analysis for Sino-Ocean Group Holding

SEHK:3377 Price to Sales Ratio vs Industry September 12th 2023

How Sino-Ocean Group Holding Has Been Performing

Sino-Ocean Group Holding has been struggling lately as its revenue has declined faster than most other companies.   Perhaps the market isn't expecting future revenue performance to improve, which has kept the P/S suppressed.  You'd much rather the company improve its revenue performance if you still believe in the business.  If not, then existing shareholders will probably struggle to get excited about the future direction of the share price.    

If you'd like to see what analysts are forecasting going forward, you should check out our free report on Sino-Ocean Group Holding.

How Is Sino-Ocean Group Holding's Revenue Growth Trending?  

The only time you'd be truly comfortable seeing a P/S as low as Sino-Ocean Group Holding's is when the company's growth is on track to lag the industry.  

In reviewing the last year of financials, we were disheartened to see the company's revenues fell to the tune of 35%.   The last three years don't look nice either as the company has shrunk revenue by 19% in aggregate.  Accordingly, shareholders would have felt downbeat about the medium-term rates of revenue growth.  

Looking ahead now, revenue is anticipated to climb by 25% during the coming year according to the three analysts following the company.  That's shaping up to be materially higher than the 15% growth forecast for the broader industry.

With this in consideration, we find it intriguing that Sino-Ocean Group Holding's P/S sits behind most of its industry peers.  Apparently some shareholders are doubtful of the forecasts and have been accepting significantly lower selling prices.  

The Final Word

The latest share price surge wasn't enough to lift Sino-Ocean Group Holding's P/S close to the industry median.      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.

A look at Sino-Ocean Group Holding's revenues reveals that, despite glowing future growth forecasts, its P/S is much lower than we'd expect.  There could be some major risk factors that are placing downward pressure on the P/S ratio.  At least price risks look to be very low, but investors seem to think future revenues could see a lot of volatility.    

Before you settle on your opinion, we've discovered 2 warning signs for Sino-Ocean Group Holding that you should be aware of.  

If these risks are making you reconsider your opinion on Sino-Ocean Group Holding, explore our interactive list of high quality stocks to get an idea of what else is out there.

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.