NIU Holdings Limited's (HKG:8619) Price In Tune With Revenues

With a median price-to-sales (or "P/S") ratio of close to 0.7x in the Professional Services industry in Hong Kong, you could be forgiven for feeling indifferent about NIU Holdings Limited's (HKG:8619) P/S ratio of 0.3x. However, investors might be overlooking a clear opportunity or potential setback if there is no rational basis for the P/S.

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Check out our latest analysis for NIU Holdings

How Has NIU Holdings Performed Recently?

The recent revenue growth at NIU Holdings would have to be considered satisfactory if not spectacular. It might be that many expect the respectable revenue performance to only match most other companies over the coming period, which has kept the P/S 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.

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

How Is NIU Holdings' Revenue Growth Trending?

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

Taking a look back first, we see that the company managed to grow revenues by a handy 3.3% last year. The latest three year period has also seen an excellent 32% overall rise in revenue, aided somewhat by its short-term performance. So we can start by confirming that the company has done a great job of growing revenues over that time.

Weighing that recent medium-term revenue trajectory against the broader industry's one-year forecast for expansion of 12% shows it's about the same on an annualised basis.

With this information, we can see why NIU Holdings is trading at a fairly similar P/S to the industry. Apparently shareholders are comfortable to simply hold on assuming the company will continue keeping a low profile.

The Bottom Line On NIU Holdings' P/S

Generally, our preference is to limit the use of the price-to-sales ratio to establishing what the market thinks about the overall health of a company.

As we've seen, NIU Holdings' three-year revenue trends seem to be contributing to its P/S, given they look similar to current industry expectations. Currently, with a past revenue trend that aligns closely wit the industry outlook, shareholders are confident the company's future revenue outlook won't contain any major surprises. If recent medium-term revenue trends continue, it's hard to see the share price moving strongly in either direction in the near future under these circumstances.

Having said that, be aware NIU Holdings is showing 3 warning signs in our investment analysis, and 2 of those don't sit too well with us.

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.