King Of Catering (Global) Holdings Ltd. (HKG:8619) Stock Rockets 29% But Many Are Still Ignoring The Company

Those holding King Of Catering (Global) Holdings Ltd. (HKG:8619) shares would be relieved that the share price has rebounded 29% in the last thirty days, but it needs to keep going to repair the recent damage it has caused to investor portfolios. But the last month did very little to improve the 67% share price decline over the last year.

In spite of the firm bounce in price, it's still not a stretch to say that King Of Catering (Global) Holdings' price-to-sales (or "P/S") ratio of 0.6x right now seems quite "middle-of-the-road" compared to the Professional Services industry in Hong Kong, where the median P/S ratio is around 0.4x. 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 King Of Catering (Global) Holdings

How Has King Of Catering (Global) Holdings Performed Recently?

King Of Catering (Global) Holdings has been doing a good job lately as it's been growing revenue at a solid pace. It might be that many expect the respectable revenue performance to wane, which has kept the P/S from rising. Those who are bullish on King Of Catering (Global) Holdings will be hoping that this isn't the case, so that they can pick up the stock at a lower valuation.

Although there are no analyst estimates available for King Of Catering (Global) Holdings, 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 King Of Catering (Global) Holdings?

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

If we review the last year of revenue growth, the company posted a terrific increase of 17%. The strong recent performance means it was also able to grow revenue by 41% 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 10% over the next year, materially lower than the company's recent medium-term annualised growth rates.

In light of this, it's curious that King Of Catering (Global) Holdings' 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 King Of Catering (Global) Holdings' P/S Mean For Investors?

King Of Catering (Global) Holdings' stock has a lot of momentum behind it lately, which has brought its P/S level with the rest of 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, King Of Catering (Global) Holdings 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. 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.

Don't forget that there may be other risks. For instance, we've identified 4 warning signs for King Of Catering (Global) Holdings (3 make us uncomfortable) you should be aware of.

It's important to make sure you look for a great company, not just the first idea you come across. So if growing profitability aligns with your idea of a great company, take a peek at this free list of interesting companies with strong recent earnings growth (and a low P/E).

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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.