Investors Holding Back On Leeport (Holdings) Limited (HKG:387)

There wouldn't be many who think Leeport (Holdings) Limited's (HKG:387) price-to-sales (or "P/S") ratio of 0.1x is worth a mention when the median P/S for the Trade Distributors industry in Hong Kong is similar at about 0.6x. 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 Leeport (Holdings)

How Has Leeport (Holdings) Performed Recently?

With revenue growth that's exceedingly strong of late, Leeport (Holdings) has been doing very well. It might be that many expect the strong revenue performance to wane, which has kept the share price, and thus the P/S ratio, from rising. 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 not quite in favour.

Although there are no analyst estimates available for Leeport (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 Leeport (Holdings)'s Revenue Growth Trending?

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

Taking a look back first, we see that the company grew revenue by an impressive 32% last year. The strong recent performance means it was also able to grow revenue by 55% in total over the last three years. So we can start by confirming that the company has done a great job of growing revenue over that time.

When compared to the industry's one-year growth forecast of 3.7%, the most recent medium-term revenue trajectory is noticeably more alluring

In light of this, it's curious that Leeport (Holdings)'s P/S sits in line with the majority of other companies. It may be that most investors are not convinced the company can maintain its recent growth rates.

What Does Leeport (Holdings)'s P/S Mean For Investors?

We'd say the price-to-sales ratio's power isn't primarily as a valuation instrument but rather to gauge current investor sentiment and future expectations.

We've established that Leeport (Holdings) currently trades on a lower than expected P/S since its recent three-year growth is higher than the wider industry forecast. When we see strong revenue with faster-than-industry growth, we can only assume potential risks are what might be placing pressure on the P/S ratio. It appears some are indeed anticipating revenue instability, because the persistence of these recent medium-term conditions would normally provide a boost to the share price.

It's always necessary to consider the ever-present spectre of investment risk. We've identified 8 warning signs with Leeport (Holdings) (at least 4 which are significant), and understanding them should be part of your investment process.

Of course, profitable companies with a history of great earnings growth are generally safer bets. So you may wish to see this free collection of other companies that have reasonable P/E ratios and have grown earnings strongly.

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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.