Market Participants Recognise Envision Greenwise Holdings Limited's (HKG:1783) Revenues Pushing Shares 30% Higher

Despite an already strong run, Envision Greenwise Holdings Limited (HKG:1783) shares have been powering on, with a gain of 30% in the last thirty days. This latest share price bounce rounds out a remarkable 804% gain over the last twelve months.

Following the firm bounce in price, given around half the companies in Hong Kong's Construction industry have price-to-sales ratios (or "P/S") below 0.3x, you may consider Envision Greenwise Holdings as a stock to avoid entirely with its 14.6x P/S ratio. However, the P/S might be quite high for a reason and it requires further investigation to determine if it's justified.

Check out our latest analysis for Envision Greenwise Holdings

How Envision Greenwise Holdings Has Been Performing

As an illustration, revenue has deteriorated at Envision Greenwise Holdings over the last year, which is not ideal at all. Perhaps the market believes the company can do enough to outperform the rest of the industry in the near future, which is keeping the P/S ratio high. If not, then existing shareholders may be quite nervous about the viability of the share price.

Although there are no analyst estimates available for Envision Greenwise 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 Envision Greenwise Holdings' Revenue Growth Trending?

In order to justify its P/S ratio, Envision Greenwise Holdings would need to produce outstanding growth that's well in excess of the industry.

In reviewing the last year of financials, we were disheartened to see the company's revenues fell to the tune of 41%. Even so, admirably revenue has lifted 60% in aggregate from three years ago, notwithstanding the last 12 months. So we can start by confirming that the company has generally done a very good job of growing revenue over that time, even though it had some hiccups along the way.

When compared to the industry's one-year growth forecast of 11%, the most recent medium-term revenue trajectory is noticeably more alluring

With this information, we can see why Envision Greenwise Holdings is trading at such a high P/S compared to the industry. Presumably shareholders aren't keen to offload something they believe will continue to outmanoeuvre the wider industry.

The Final Word

Envision Greenwise Holdings' P/S has grown nicely over the last month thanks to a handy boost in the share price. 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.

As we suspected, our examination of Envision Greenwise Holdings revealed its three-year revenue trends are contributing to its high P/S, given they look better than current industry expectations. Right now shareholders are comfortable with the P/S as they are quite confident revenue aren't under threat. Unless the recent medium-term conditions change, they will continue to provide strong support to the share price.

And what about other risks? Every company has them, and we've spotted 2 warning signs for Envision Greenwise Holdings (of which 1 is a bit concerning!) you should know about.

If these risks are making you reconsider your opinion on Envision Greenwise 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.