What Yuk Wing Group Holdings Limited's (HKG:1536) 29% Share Price Gain Is Not Telling You

Yuk Wing Group Holdings Limited (HKG:1536) shares have had a really impressive month, gaining 29% after a shaky period beforehand. But the gains over the last month weren't enough to make shareholders whole, as the share price is still down 5.2% in the last twelve months.

Although its price has surged higher, there still wouldn't be many who think Yuk Wing Group Holdings' price-to-sales (or "P/S") ratio of 0.3x is worth a mention when the median P/S in Hong Kong's Machinery industry is similar at about 0.7x. While this might not raise any eyebrows, if the P/S ratio is not justified investors could be missing out on a potential opportunity or ignoring looming disappointment.

Check out our latest analysis for Yuk Wing Group Holdings

What Does Yuk Wing Group Holdings' Recent Performance Look Like?

For example, consider that Yuk Wing Group Holdings' financial performance has been poor lately as its revenue has been in decline. It might be that many expect the company to put the disappointing revenue performance behind them over the coming period, 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.

Want the full picture on earnings, revenue and cash flow for the company? Then our free report on Yuk Wing Group Holdings will help you shine a light on its historical performance.

Is There Some Revenue Growth Forecasted For Yuk Wing Group Holdings?

There's an inherent assumption that a company should be matching the industry for P/S ratios like Yuk Wing Group Holdings' to be considered reasonable.

Retrospectively, the last year delivered a frustrating 8.9% decrease to the company's top line. Regardless, revenue has managed to lift by a handy 15% in aggregate from three years ago, thanks to the earlier period of growth. So we can start by confirming that the company has generally done a good job of growing revenue over that time, even though it had some hiccups along the way.

Comparing that to the industry, which is predicted to deliver 12% growth in the next 12 months, the company's momentum is weaker, based on recent medium-term annualised revenue results.

With this in mind, we find it intriguing that Yuk Wing Group Holdings' P/S is comparable to that of its industry peers. Apparently many investors in the company are less bearish than recent times would indicate and aren't willing to let go of their stock right now. Maintaining these prices will be difficult to achieve as a continuation of recent revenue trends is likely to weigh down the shares eventually.

The Final Word

Its shares have lifted substantially and now Yuk Wing Group Holdings' P/S is back within range of the industry median. 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 Yuk Wing Group Holdings revealed its poor three-year revenue trends aren't resulting in a lower P/S as per our expectations, given they look worse than current industry outlook. Right now we are uncomfortable with the P/S as this revenue performance isn't likely to support a more positive sentiment for long. Unless the recent medium-term conditions improve, it's hard to accept the current share price as fair value.

There are also other vital risk factors to consider and we've discovered 3 warning signs for Yuk Wing Group Holdings (2 don't sit too well with us!) that you should be aware of before investing here.

If these risks are making you reconsider your opinion on Yuk Wing Group Holdings, 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.