Some Envision Greenwise Holdings Limited (HKG:1783) Shareholders Look For Exit As Shares Take 25% Pounding

Envision Greenwise Holdings Limited (HKG:1783) shares have had a horrible month, losing 25% after a relatively good period beforehand. Looking back over the past twelve months the stock has been a solid performer regardless, with a gain of 15%.

In spite of the heavy fall in price, you could still be forgiven for thinking Envision Greenwise Holdings is a stock to steer clear of with a price-to-sales ratios (or "P/S") of 9.7x, considering almost half the companies in Hong Kong's Construction industry have P/S ratios below 0.4x. However, the P/S might be quite high for a reason and it requires further investigation to determine if it's justified.

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View our latest analysis for Envision Greenwise Holdings

How Envision Greenwise Holdings Has Been Performing

With revenue growth that's exceedingly strong of late, Envision Greenwise Holdings has been doing very well. It seems that many are expecting the strong revenue performance to beat most other companies over the coming period, which has increased investors’ willingness to pay up for the stock. However, if this isn't the case, investors might get caught out paying too much for the stock.

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

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.

If we review the last year of revenue growth, the company posted a terrific increase of 92%. Pleasingly, revenue has also lifted 47% in aggregate from three years ago, thanks to the last 12 months of growth. So we can start by confirming that the company has done a great job of growing revenue over that time.

This is in contrast to the rest of the industry, which is expected to grow by 17% over the next year, materially higher than the company's recent medium-term annualised growth rates.

With this in mind, we find it worrying that Envision Greenwise Holdings' P/S exceeds that of its industry peers. Apparently many investors in the company are way more bullish than recent times would indicate and aren't willing to let go of their stock at any price. Only the boldest would assume these prices are sustainable as a continuation of recent revenue trends is likely to weigh heavily on the share price eventually.

The Bottom Line On Envision Greenwise Holdings' P/S

Even after such a strong price drop, Envision Greenwise Holdings' P/S still exceeds the industry median significantly. Generally, our preference is to limit the use of the price-to-sales ratio to establishing what the market thinks about the overall health of a company.

Our examination of Envision Greenwise Holdings revealed its poor three-year revenue trends aren't detracting from the P/S as much as we though, given they look worse than current industry expectations. When we see slower than industry revenue growth but an elevated P/S, there's considerable risk of the share price declining, sending the P/S lower. If recent medium-term revenue trends continue, it will place shareholders' investments at significant risk and potential investors in danger of paying an excessive premium.

Plus, you should also learn about this 1 warning sign we've spotted with Envision Greenwise Holdings.

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.