With a median price-to-sales (or "P/S") ratio of close to 0.5x in the Metals and Mining industry in Hong Kong, you could be forgiven for feeling indifferent about Angang Steel Company Limited's (HKG:347) P/S ratio of 0.1x. Although, it's not wise to simply ignore the P/S without explanation as investors may be disregarding a distinct opportunity or a costly mistake.
See our latest analysis for Angang Steel
How Angang Steel Has Been Performing
Angang Steel could be doing better as its revenue has been going backwards lately while most other companies have been seeing positive revenue growth. It might be that many expect the dour revenue performance to strengthen positively, which has kept the P/S from falling. If not, then existing shareholders may be a little nervous about the viability of the share price.
Keen to find out how analysts think Angang Steel's future stacks up against the industry? In that case, our free report is a great place to start.How Is Angang Steel's Revenue Growth Trending?
The only time you'd be comfortable seeing a P/S like Angang Steel's is when the company's growth is tracking the industry closely.
Taking a look back first, the company's revenue growth last year wasn't something to get excited about as it posted a disappointing decline of 13%. This means it has also seen a slide in revenue over the longer-term as revenue is down 2.1% in total over the last three years. Therefore, it's fair to say the revenue growth recently has been undesirable for the company.
Looking ahead now, revenue is anticipated to climb by 2.7% during the coming year according to the nine analysts following the company. That's shaping up to be materially lower than the 12% growth forecast for the broader industry.
With this in mind, we find it intriguing that Angang Steel's P/S is closely matching its industry peers. Apparently many investors in the company are less bearish than analysts indicate and aren't willing to let go of their stock right now. Maintaining these prices will be difficult to achieve as this level of revenue growth is likely to weigh down the shares eventually.
The Key Takeaway
Typically, we'd caution against reading too much into price-to-sales ratios when settling on investment decisions, though it can reveal plenty about what other market participants think about the company.
Our look at the analysts forecasts of Angang Steel's revenue prospects has shown that its inferior revenue outlook isn't negatively impacting its P/S as much as we would have predicted. At present, we aren't confident in the P/S as the predicted future revenues aren't likely to support a more positive sentiment for long. Circumstances like this present a risk to current and prospective investors who may see share prices fall if the low revenue growth impacts the sentiment.
A lot of potential risks can sit within a company's balance sheet. Take a look at our free balance sheet analysis for Angang Steel with six simple checks on some of these key factors.
If these risks are making you reconsider your opinion on Angang Steel, explore our interactive list of high quality stocks to get an idea of what else is out there.
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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.