Investors Still Aren't Entirely Convinced By Zhejiang United Investment Holdings Group Limited's (HKG:8366) Revenues Despite 67% Price Jump

The Zhejiang United Investment Holdings Group Limited (HKG:8366) share price has done very well over the last month, posting an excellent gain of 67%. Longer-term shareholders would be thankful for the recovery in the share price since it's now virtually flat for the year after the recent bounce.

Even after such a large jump in price, it's still not a stretch to say that Zhejiang United Investment Holdings Group's price-to-sales (or "P/S") ratio of 0.1x right now seems quite "middle-of-the-road" compared to the Construction industry in Hong Kong, where the median P/S ratio is around 0.3x. However, investors might be overlooking a clear opportunity or potential setback if there is no rational basis for the P/S.

Check out our latest analysis for Zhejiang United Investment Holdings Group

What Does Zhejiang United Investment Holdings Group's Recent Performance Look Like?

With revenue growth that's exceedingly strong of late, Zhejiang United Investment Holdings Group has been doing very well. Perhaps the market is expecting future revenue performance to taper off, which has kept the P/S from rising. If that doesn't eventuate, then existing shareholders have reason to be feeling optimistic about the future direction of the share price.

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

Is There Some Revenue Growth Forecasted For Zhejiang United Investment Holdings Group?

The only time you'd be comfortable seeing a P/S like Zhejiang United Investment Holdings Group's is when the company's growth is tracking the industry closely.

If we review the last year of revenue growth, the company posted a terrific increase of 52%. The strong recent performance means it was also able to grow revenue by 174% in total over the last three years. Therefore, it's fair to say the revenue growth recently has been superb for the company.

This is in contrast to the rest of the industry, which is expected to grow by 9.9% over the next year, materially lower than the company's recent medium-term annualised growth rates.

In light of this, it's curious that Zhejiang United Investment Holdings Group'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 We Can Learn From Zhejiang United Investment Holdings Group's P/S?

Zhejiang United Investment Holdings Group appears to be back in favour with a solid price jump bringing its P/S back in line with other companies in the industry 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.

To our surprise, Zhejiang United Investment Holdings Group revealed its three-year revenue trends aren't contributing to its P/S as much as we would have predicted, given they look better than current industry expectations. There could be some unobserved threats to revenue preventing the P/S ratio from matching this positive performance. While recent revenue trends over the past medium-term suggest that the risk of a price decline is low, investors appear to see the likelihood of revenue fluctuations in the future.

It is also worth noting that we have found 3 warning signs for Zhejiang United Investment Holdings Group that you need to take into consideration.

If these risks are making you reconsider your opinion on Zhejiang United Investment Holdings Group, 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.