Yeahka Limited (HKG:9923) shares have continued their recent momentum with a 29% gain in the last month alone. The bad news is that even after the stocks recovery in the last 30 days, shareholders are still underwater by about 6.8% over the last year.
In spite of the firm bounce in price, there still wouldn't be many who think Yeahka's price-to-sales (or "P/S") ratio of 1.5x is worth a mention when the median P/S in Hong Kong's Diversified Financial industry is similar at about 1.8x. 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 Yeahka
What Does Yeahka's Recent Performance Look Like?
While the industry has experienced revenue growth lately, Yeahka's revenue has gone into reverse gear, which is not great. Perhaps the market is expecting its poor revenue performance to improve, keeping the P/S from dropping. You'd really hope so, otherwise you're paying a relatively elevated price for a company with this sort of growth profile.
If you'd like to see what analysts are forecasting going forward, you should check out our free report on Yeahka.Is There Some Revenue Growth Forecasted For Yeahka?
Yeahka's 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.
In reviewing the last year of financials, we were disheartened to see the company's revenues fell to the tune of 9.7%. Still, the latest three year period has seen an excellent 32% overall rise in revenue, in spite of its unsatisfying short-term performance. Accordingly, while they would have preferred to keep the run going, shareholders would definitely welcome the medium-term rates of revenue growth.
Turning to the outlook, the next three years should generate growth of 14% each year as estimated by the eleven analysts watching the company. With the industry only predicted to deliver 11% per year, the company is positioned for a stronger revenue result.
With this in consideration, we find it intriguing that Yeahka's P/S is closely matching its industry peers. It may be that most investors aren't convinced the company can achieve future growth expectations.
What Does Yeahka's P/S Mean For Investors?
Yeahka's stock has a lot of momentum behind it lately, which has brought its P/S level with the rest of the industry. Generally, our preference is to limit the use of the price-to-sales ratio to establishing what the market thinks about the overall health of a company.
Looking at Yeahka's analyst forecasts revealed that its superior revenue outlook isn't giving the boost to its P/S that we would've expected. Perhaps uncertainty in the revenue forecasts are what's keeping the P/S ratio consistent with the rest of the industry. At least the risk of a price drop looks to be subdued, but investors seem to think future revenue could see some volatility.
Having said that, be aware Yeahka is showing 2 warning signs in our investment analysis, you should know about.
If strong companies turning a profit tickle your fancy, then you'll want to check out this free list of interesting companies that trade on a low P/E (but have proven they can grow earnings).
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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.