What You Can Learn From Hangzhou Coco Healthcare Products Co.,Ltd.'s (SZSE:301009) P/S

It's not a stretch to say that Hangzhou Coco Healthcare Products Co.,Ltd.'s (SZSE:301009) price-to-sales (or "P/S") ratio of 2.1x seems quite "middle-of-the-road" for Household Products companies in China, seeing as it matches the P/S ratio of the wider industry. 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 Hangzhou Coco Healthcare ProductsLtd

How Has Hangzhou Coco Healthcare ProductsLtd Performed Recently?

Hangzhou Coco Healthcare ProductsLtd has been struggling lately as its revenue has declined faster than most other companies. It might be that many expect the dismal revenue performance to revert back to industry averages soon, which has kept the P/S from falling. You'd much rather the company improve its revenue if you still believe in the business. Or at the very least, you'd be hoping it doesn't keep underperforming if your plan is to pick up some stock while it's not in favour.

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.

How Is Hangzhou Coco Healthcare ProductsLtd's Revenue Growth Trending?

Hangzhou Coco Healthcare ProductsLtd'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 11%. This means it has also seen a slide in revenue over the longer-term as revenue is down 29% in total over the last three years. 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 17% during the coming year according to the only analyst following the company. That's shaping up to be similar to the 18% growth forecast for the broader industry.

With this information, we can see why Hangzhou Coco Healthcare ProductsLtd is trading at a fairly similar P/S to the industry. It seems most investors are expecting to see average future growth and are only willing to pay a moderate amount for the stock.

What Does Hangzhou Coco Healthcare ProductsLtd's P/S Mean For Investors?

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.

A Hangzhou Coco Healthcare ProductsLtd's P/S seems about right to us given the knowledge that analysts are forecasting a revenue outlook that is similar to the Household Products industry. Right now shareholders are comfortable with the P/S as they are quite confident future revenue won't throw up any surprises. All things considered, if the P/S and revenue estimates contain no major shocks, then it's hard to see the share price moving strongly in either direction in the near future.

You should always think about risks. Case in point, we've spotted 1 warning sign for Hangzhou Coco Healthcare ProductsLtd you should be aware of.

If you're unsure about the strength of Hangzhou Coco Healthcare ProductsLtd's 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.