Yuk Wing Group Holdings Limited's (HKG:1536) Shares Leap 31% Yet They're Still Not Telling The Full Story

Yuk Wing Group Holdings Limited (HKG:1536) shareholders would be excited to see that the share price has had a great month, posting a 31% gain and recovering from prior weakness. Looking back a bit further, it's encouraging to see the stock is up 45% in the last year.

Even after such a large jump in price, when close to half the companies operating in Hong Kong's Machinery industry have price-to-sales ratios (or "P/S") above 0.8x, you may still consider Yuk Wing Group Holdings as an enticing stock to check out with its 0.3x P/S ratio. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's limited.

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Check out our latest analysis for Yuk Wing Group Holdings

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

Recent times have been quite advantageous for Yuk Wing Group Holdings as its revenue has been rising very briskly. It might be that many expect the strong revenue performance to degrade substantially, which has repressed the P/S ratio. If you like the company, you'd be hoping this isn't the case so that you could potentially pick up some stock while it's out of favour.

Although there are no analyst estimates available for Yuk Wing Group Holdings, take a look at this free data-rich visualisation to see how the company stacks up on earnings, revenue and cash flow.

How Is Yuk Wing Group Holdings' Revenue Growth Trending?

Yuk Wing Group Holdings' P/S ratio would be typical for a company that's only expected to deliver limited growth, and importantly, perform worse than the industry.

Retrospectively, the last year delivered an exceptional 46% gain to the company's top line. The latest three year period has also seen an excellent 53% overall rise in revenue, aided by its short-term performance. So we can start by confirming that the company has done a great job of growing revenue over that time.

Weighing that recent medium-term revenue trajectory against the broader industry's one-year forecast for expansion of 13% shows it's about the same on an annualised basis.

In light of this, it's peculiar that Yuk Wing Group Holdings' P/S sits below the majority of other companies. Apparently some shareholders are more bearish than recent times would indicate and have been accepting lower selling prices.

The Final Word

The latest share price surge wasn't enough to lift Yuk Wing Group Holdings' P/S close to the industry median. 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.

The fact that Yuk Wing Group Holdings currently trades at a low P/S relative to the industry is unexpected considering its recent three-year growth is in line with the wider industry forecast. When we see industry-like revenue growth but a lower than expected P/S, we assume potential risks are what might be placing downward pressure on the share price. revenue trends suggest that the risk of a price decline is low, investors appear to perceive a possibility of revenue volatility in the future.

It is also worth noting that we have found 4 warning signs for Yuk Wing Group Holdings (2 are concerning!) that you need to take into consideration.

It's important to make sure you look for a great company, not just the first idea you come across. So if growing profitability aligns with your idea of a great company, take a peek at this free list of interesting companies with strong recent earnings growth (and a low P/E).

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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.