Sun Hing Printing Holdings Limited's (HKG:1975) 30% Dip Still Leaving Some Shareholders Feeling Restless Over Its P/SRatio

To the annoyance of some shareholders, Sun Hing Printing Holdings Limited (HKG:1975) shares are down a considerable 30% in the last month, which continues a horrid run for the company. The recent drop completes a disastrous twelve months for shareholders, who are sitting on a 68% loss during that time.

Even after such a large drop in price, there still wouldn't be many who think Sun Hing Printing Holdings' price-to-sales (or "P/S") ratio of 0.4x is worth a mention when it essentially matches the median P/S in Hong Kong's Commercial Services industry. While this might not raise any eyebrows, if the P/S ratio is not justified investors could be missing out on a potential opportunity or ignoring looming disappointment.

View our latest analysis for Sun Hing Printing Holdings

How Has Sun Hing Printing Holdings Performed Recently?

For instance, Sun Hing Printing Holdings' receding revenue in recent times would have to be some food for thought. Perhaps investors believe the recent revenue performance is enough to keep in line with the industry, which is keeping the P/S from dropping off. If not, then existing shareholders may be a little nervous about the viability of the share price.

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

What Are Revenue Growth Metrics Telling Us About The P/S?

In order to justify its P/S ratio, Sun Hing Printing Holdings would need to produce growth that's similar to the industry.

Retrospectively, the last year delivered a frustrating 47% decrease to the company's top line. Regardless, revenue has managed to lift by a handy 15% in aggregate from three years ago, thanks to the earlier period of growth. Although it's been a bumpy ride, it's still fair to say the revenue growth recently has been mostly respectable for the company.

This is in contrast to the rest of the industry, which is expected to grow by 8.3% over the next year, materially higher than the company's recent medium-term annualised growth rates.

With this information, we find it interesting that Sun Hing Printing Holdings is trading at a fairly similar P/S compared to the industry. 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 Sun Hing Printing Holdings' P/S Mean For Investors?

Sun Hing Printing Holdings' plummeting stock price has brought its P/S back to a similar region as the rest of the industry. 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 Sun Hing Printing Holdings' average P/S is a bit surprising since its recent three-year growth is lower than the wider industry forecast. Right now we are uncomfortable with the P/S as this revenue performance isn't likely to support a more positive sentiment for long. Unless there is a significant improvement in the company's medium-term performance, it will be difficult to prevent the P/S ratio from declining to a more reasonable level.

Having said that, be aware Sun Hing Printing Holdings is showing 4 warning signs in our investment analysis, you should know about.

If these risks are making you reconsider your opinion on Sun Hing Printing 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.