Some Hing Ming Holdings Limited (HKG:8425) Shareholders Look For Exit As Shares Take 30% Pounding

Unfortunately for some shareholders, the Hing Ming Holdings Limited (HKG:8425) share price has dived 30% in the last thirty days, prolonging recent pain. The recent drop completes a disastrous twelve months for shareholders, who are sitting on a 78% loss during that time.

Even after such a large drop in price, you could still be forgiven for feeling indifferent about Hing Ming Holdings' P/S ratio of 0.1x, since the median price-to-sales (or "P/S") ratio for the Trade Distributors industry in Hong Kong is also close to 0.4x. 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.

View our latest analysis for Hing Ming Holdings

What Does Hing Ming Holdings' Recent Performance Look Like?

The revenue growth achieved at Hing Ming Holdings over the last year would be more than acceptable for most companies. Perhaps the market is expecting future revenue performance to only keep up with the broader industry, which has keeping the P/S in line with expectations. 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.

We don't have analyst forecasts, but you can see how recent trends are setting up the company for the future by checking out our free report on Hing Ming Holdings' earnings, revenue and cash flow.

How Is Hing Ming Holdings' Revenue Growth Trending?

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

Taking a look back first, we see that the company managed to grow revenues by a handy 9.8% last year. This was backed up an excellent period prior to see revenue up by 106% in total over the last three years. Accordingly, shareholders would have definitely welcomed those medium-term rates of revenue growth.

This is in contrast to the rest of the industry, which is expected to grow by 34% over the next year, materially higher than the company's recent medium-term annualised growth rates.

With this in mind, we find it intriguing that Hing Ming Holdings' P/S is comparable to that of its industry peers. It seems most investors are ignoring the fairly limited recent growth rates and are willing to pay up for exposure to the stock. They may be setting themselves up for future disappointment if the P/S falls to levels more in line with recent growth rates.

What Does Hing Ming Holdings' P/S Mean For Investors?

Hing Ming Holdings' plummeting stock price has brought its P/S back to a similar region as the rest of the industry. 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.

We've established that Hing Ming Holdings' average P/S is a bit surprising since its recent three-year growth is lower than the wider industry forecast. When we see weak revenue with slower than industry growth, we suspect the share price is at risk of declining, bringing the P/S back in line with expectations. If recent medium-term revenue trends continue, the probability of a share price decline will become quite substantial, placing shareholders at risk.

Having said that, be aware Hing Ming Holdings is showing 4 warning signs in our investment analysis, and 2 of those are a bit concerning.

If you're unsure about the strength of Hing Ming Holdings' business, why not explore our interactive list of stocks with solid business fundamentals for some other companies you may have missed.

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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.