Tse Sui Luen Jewellery (International) Limited (HKG:417) Stock Catapults 44% Though Its Price And Business Still Lag The Industry

Tse Sui Luen Jewellery (International) Limited (HKG:417) shareholders would be excited to see that the share price has had a great month, posting a 44% gain and recovering from prior weakness. But the gains over the last month weren't enough to make shareholders whole, as the share price is still down 7.4% in the last twelve months.

Although its price has surged higher, given about half the companies operating in Hong Kong's Luxury industry have price-to-sales ratios (or "P/S") above 0.7x, you may still consider Tse Sui Luen Jewellery (International) as an attractive investment with its 0.1x P/S ratio. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the reduced P/S.

Check out our latest analysis for Tse Sui Luen Jewellery (International)

How Has Tse Sui Luen Jewellery (International) Performed Recently?

As an illustration, revenue has deteriorated at Tse Sui Luen Jewellery (International) over the last year, which is not ideal at all. Perhaps the market believes the recent revenue performance isn't good enough to keep up the industry, causing the P/S ratio to suffer. 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 out of favour.

Want the full picture on earnings, revenue and cash flow for the company? Then our free report on Tse Sui Luen Jewellery (International) will help you shine a light on its historical performance.

Is There Any Revenue Growth Forecasted For Tse Sui Luen Jewellery (International)?

In order to justify its P/S ratio, Tse Sui Luen Jewellery (International) would need to produce sluggish growth that's trailing the industry.

In reviewing the last year of financials, we were disheartened to see the company's revenues fell to the tune of 19%. This means it has also seen a slide in revenue over the longer-term as revenue is down 24% in total over the last three years. Therefore, it's fair to say the revenue growth recently has been undesirable for the company.

In contrast to the company, the rest of the industry is expected to grow by 20% over the next year, which really puts the company's recent medium-term revenue decline into perspective.

In light of this, it's understandable that Tse Sui Luen Jewellery (International)'s P/S would sit below the majority of other companies. Nonetheless, there's no guarantee the P/S has reached a floor yet with revenue going in reverse. Even just maintaining these prices could be difficult to achieve as recent revenue trends are already weighing down the shares.

What Does Tse Sui Luen Jewellery (International)'s P/S Mean For Investors?

Tse Sui Luen Jewellery (International)'s stock price has surged recently, but its but its P/S still remains modest. 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.

As we suspected, our examination of Tse Sui Luen Jewellery (International) revealed its shrinking revenue over the medium-term is contributing to its low P/S, given the industry is set to grow. Right now shareholders are accepting the low P/S as they concede future revenue probably won't provide any pleasant surprises either. Unless the recent medium-term conditions improve, they will continue to form a barrier for the share price around these levels.

There are also other vital risk factors to consider and we've discovered 3 warning signs for Tse Sui Luen Jewellery (International) (1 is a bit unpleasant!) that you should be aware of before investing here.

If companies with solid past earnings growth is up your alley, you may wish to see this free collection of other companies with strong earnings growth and low P/E ratios.

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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.