New Hope Liuhe Co.,Ltd.'s (SZSE:000876) Share Price Is Matching Sentiment Around Its Revenues

Simply Wall St ·  Jan 28 19:26

New Hope Liuhe Co.,Ltd.'s (SZSE:000876) price-to-sales (or "P/S") ratio of 0.3x might make it look like a buy right now compared to the Food industry in China, where around half of the companies have P/S ratios above 1.8x and even P/S above 4x are quite common. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's limited.

Check out our latest analysis for New Hope LiuheLtd

SZSE:000876 Price to Sales Ratio vs Industry January 29th 2024

How New Hope LiuheLtd Has Been Performing

There hasn't been much to differentiate New Hope LiuheLtd's and the industry's revenue growth lately. One possibility is that the P/S ratio is low because investors think this modest revenue performance may begin to slide. If you like the company, you'd be hoping this isn't the case so that you could pick up some stock while it's out of favour.

If you'd like to see what analysts are forecasting going forward, you should check out our free report on New Hope LiuheLtd.

How Is New Hope LiuheLtd's Revenue Growth Trending?

New Hope LiuheLtd's P/S ratio would be typical for a company that's only expected to deliver limited growth, and importantly, perform worse than the industry.

Retrospectively, the last year delivered a decent 12% gain to the company's revenues. This was backed up an excellent period prior to see revenue up by 48% in total over the last three years. Therefore, it's fair to say the revenue growth recently has been superb for the company.

Turning to the outlook, the next year should generate growth of 7.3% as estimated by the seven analysts watching the company. With the industry predicted to deliver 16% growth, the company is positioned for a weaker revenue result.

With this information, we can see why New Hope LiuheLtd is trading at a P/S lower than the industry. Apparently many shareholders weren't comfortable holding on while the company is potentially eyeing a less prosperous future.

The Bottom Line On New Hope LiuheLtd's P/S

We'd say the price-to-sales ratio's power isn't primarily as a valuation instrument but rather to gauge current investor sentiment and future expectations.

As expected, our analysis of New Hope LiuheLtd's analyst forecasts confirms that the company's underwhelming revenue outlook is a major contributor to its low P/S. At this stage investors feel the potential for an improvement in revenue isn't great enough to justify a higher P/S ratio. It's hard to see the share price rising strongly in the near future under these circumstances.

Before you take the next step, you should know about the 2 warning signs for New Hope LiuheLtd that we have uncovered.

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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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.

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