Those holding Orange Sky Golden Harvest Entertainment (Holdings) Limited (HKG:1132) shares would be relieved that the share price has rebounded 29% in the last thirty days, but it needs to keep going to repair the recent damage it has caused to investor portfolios. The last 30 days bring the annual gain to a very sharp 26%.
Although its price has surged higher, Orange Sky Golden Harvest Entertainment (Holdings) may still be sending bullish signals at the moment with its price-to-sales (or "P/S") ratio of 0.2x, since almost half of all companies in the Entertainment industry in Hong Kong have P/S ratios greater than 1.6x and even P/S higher than 4x are not unusual. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's limited.
View our latest analysis for Orange Sky Golden Harvest Entertainment (Holdings)
How Orange Sky Golden Harvest Entertainment (Holdings) Has Been Performing
We'd have to say that with no tangible growth over the last year, Orange Sky Golden Harvest Entertainment (Holdings)'s revenue has been unimpressive. It might be that many expect the uninspiring revenue performance to worsen, which has repressed the P/S. Those who are bullish on Orange Sky Golden Harvest Entertainment (Holdings) will be hoping that this isn't the case, so that they can pick up the stock at a lower valuation.
Although there are no analyst estimates available for Orange Sky Golden Harvest Entertainment (Holdings), take a look at this free data-rich visualisation to see how the company stacks up on earnings, revenue and cash flow.Do Revenue Forecasts Match The Low P/S Ratio?
In order to justify its P/S ratio, Orange Sky Golden Harvest Entertainment (Holdings) would need to produce sluggish growth that's trailing the industry.
Taking a look back first, we see that there was hardly any revenue growth to speak of for the company over the past year. However, a few strong years before that means that it was still able to grow revenue by an impressive 109% in total over the last three years. Therefore, it's fair to say the revenue growth recently has been great for the company, but investors will want to ask why it has slowed to such an extent.
This is in contrast to the rest of the industry, which is expected to grow by 14% over the next year, materially lower than the company's recent medium-term annualised growth rates.
With this in mind, we find it intriguing that Orange Sky Golden Harvest Entertainment (Holdings)'s P/S isn't as high compared to that of its industry peers. It looks like most investors are not convinced the company can maintain its recent growth rates.
The Bottom Line On Orange Sky Golden Harvest Entertainment (Holdings)'s P/S
Orange Sky Golden Harvest Entertainment (Holdings)'s stock price has surged recently, but its but its P/S still remains modest. 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 examination of Orange Sky Golden Harvest Entertainment (Holdings) revealed its three-year revenue trends aren't boosting its P/S anywhere near as much as we would have predicted, given they look better than current industry expectations. When we see strong revenue with faster-than-industry growth, we assume there are some significant underlying risks to the company's ability to make money which is applying downwards pressure on the P/S ratio. It appears many are indeed anticipating revenue instability, because the persistence of these recent medium-term conditions would normally provide a boost to the share price.
Plus, you should also learn about these 2 warning signs we've spotted with Orange Sky Golden Harvest Entertainment (Holdings) (including 1 which is significant).
If these risks are making you reconsider your opinion on Orange Sky Golden Harvest Entertainment (Holdings), 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.