There wouldn't be many who think Cinese International Group Holdings Limited's (HKG:1620) price-to-sales (or "P/S") ratio of 0.7x is worth a mention when the median P/S for the Hospitality industry in Hong Kong is similar at about 1x. However, investors might be overlooking a clear opportunity or potential setback if there is no rational basis for the P/S.
See our latest analysis for Cinese International Group Holdings
How Has Cinese International Group Holdings Performed Recently?
Cinese International Group Holdings certainly has been doing a great job lately as it's been growing its revenue at a really rapid pace. The P/S is probably moderate because investors think this strong revenue growth might not be enough to outperform the broader industry in the near future. If you like the company, you'd be hoping this isn't the case so that you could potentially pick up some stock while it's not quite in favour.
We don't have analyst forecasts, but you can see how recent trends are setting up the company for the future by checking out our free report on Cinese International Group Holdings' earnings, revenue and cash flow.Is There Some Revenue Growth Forecasted For Cinese International Group Holdings?
Cinese International Group Holdings' P/S ratio would be typical for a company that's only expected to deliver moderate growth, and importantly, perform in line with the industry.
Retrospectively, the last year delivered an exceptional 126% gain to the company's top line. The strong recent performance means it was also able to grow revenue by 101% in total over the last three years. Accordingly, shareholders would have definitely welcomed those medium-term rates of revenue growth.
When compared to the industry's one-year growth forecast of 19%, the most recent medium-term revenue trajectory is noticeably more alluring
In light of this, it's curious that Cinese International Group Holdings' P/S sits in line with the majority of other companies. It may be that most investors are not convinced the company can maintain its recent growth rates.
The Bottom Line On Cinese International Group Holdings' P/S
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 didn't quite envision Cinese International Group Holdings' 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. When we see strong revenue with faster-than-industry growth, we can only assume potential risks are what might be placing pressure on the P/S ratio. While recent revenue trends over the past medium-term suggest that the risk of a price decline is low, investors appear to see the likelihood of revenue fluctuations in the future.
We don't want to rain on the parade too much, but we did also find 3 warning signs for Cinese International Group Holdings (2 can't be ignored!) that you need to be mindful of.
If you're unsure about the strength of Cinese International Group Holdings' 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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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.