Subdued Growth No Barrier To Hangzhou Coco Healthcare Products Co.,Ltd. (SZSE:301009) With Shares Advancing 38%

Despite an already strong run, Hangzhou Coco Healthcare Products Co.,Ltd. (SZSE:301009) shares have been powering on, with a gain of 38% in the last thirty days. Taking a wider view, although not as strong as the last month, the full year gain of 17% is also fairly reasonable.

In spite of the firm bounce in price, there still wouldn't be many who think Hangzhou Coco Healthcare ProductsLtd's price-to-sales (or "P/S") ratio of 3.1x is worth a mention when the median P/S in China's Household Products industry is similar at about 2.6x. 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.

View our latest analysis for Hangzhou Coco Healthcare ProductsLtd

What Does Hangzhou Coco Healthcare ProductsLtd's Recent Performance Look Like?

Hangzhou Coco Healthcare ProductsLtd could be doing better as its revenue has been going backwards lately while most other companies have been seeing positive revenue growth. One possibility is that the P/S ratio is moderate because investors think this poor revenue performance will turn around. However, if this isn't the case, investors might get caught out paying too much for the stock.

Keen to find out how analysts think Hangzhou Coco Healthcare ProductsLtd's future stacks up against the industry? In that case, our free report is a great place to start.

Do Revenue Forecasts Match The P/S Ratio?

There's an inherent assumption that a company should be matching the industry for P/S ratios like Hangzhou Coco Healthcare ProductsLtd's to be considered reasonable.

Retrospectively, the last year delivered a frustrating 7.0% decrease to the company's top line. The last three years don't look nice either as the company has shrunk revenue by 16% in aggregate. So unfortunately, we have to acknowledge that the company has not done a great job of growing revenue over that time.

Looking ahead now, revenue is anticipated to climb by 6.7% during the coming year according to the only analyst following the company. With the industry predicted to deliver 16% growth, the company is positioned for a weaker revenue result.

In light of this, it's curious that Hangzhou Coco Healthcare ProductsLtd's P/S sits in line with the majority of other companies. It seems most investors are ignoring the fairly limited growth expectations and are willing to pay up for exposure to the stock. Maintaining these prices will be difficult to achieve as this level of revenue growth is likely to weigh down the shares eventually.

What We Can Learn From Hangzhou Coco Healthcare ProductsLtd's P/S?

Its shares have lifted substantially and now Hangzhou Coco Healthcare ProductsLtd's P/S is back within range of the industry median. Using the price-to-sales ratio alone to determine if you should sell your stock isn't sensible, however it can be a practical guide to the company's future prospects.

Given that Hangzhou Coco Healthcare ProductsLtd's revenue growth projections are relatively subdued in comparison to the wider industry, it comes as a surprise to see it trading at its current P/S ratio. 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.

Don't forget that there may be other risks. For instance, we've identified 1 warning sign for Hangzhou Coco Healthcare ProductsLtd that you should be aware of.

If these risks are making you reconsider your opinion on Hangzhou Coco Healthcare ProductsLtd, 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.