Lisi Group (Holdings) Limited's (HKG:526) Share Price Is Still Matching Investor Opinion Despite 26% Slump

Unfortunately for some shareholders, the Lisi Group (Holdings) Limited (HKG:526) share price has dived 26% in the last thirty days, prolonging recent pain. Looking back over the past twelve months the stock has been a solid performer regardless, with a gain of 13%.

Even after such a large drop in price, you could still be forgiven for feeling indifferent about Lisi Group (Holdings)'s P/S ratio of 0.2x, since the median price-to-sales (or "P/S") ratio for the Consumer Durables industry in Hong Kong is also close to 0.7x. 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 Lisi Group (Holdings)

How Has Lisi Group (Holdings) Performed Recently?

It looks like revenue growth has deserted Lisi Group (Holdings) recently, which is not something to boast about. One possibility is that the P/S is moderate because investors think this benign revenue growth rate might not be enough to outperform the broader industry in the near future. Those who are bullish on Lisi Group (Holdings) will be hoping that this isn't the case, so that they can pick up the stock at a lower valuation.

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

Do Revenue Forecasts Match The P/S Ratio?

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

Taking a look back first, we see that there was hardly any revenue growth to speak of for the company over the past year. Fortunately, a few good years before that means that it was still able to grow revenue by 26% in total over the last three years. So it appears to us that the company has had a mixed result in terms of growing revenue over that time.

Weighing that recent medium-term revenue trajectory against the broader industry's one-year forecast for expansion of 8.0% shows it's about the same on an annualised basis.

In light of this, it's understandable that Lisi Group (Holdings)'s P/S sits in line with the majority of other companies. It seems most investors are expecting to see average growth rates continue into the future and are only willing to pay a moderate amount for the stock.

The Bottom Line On Lisi Group (Holdings)'s P/S

With its share price dropping off a cliff, the P/S for Lisi Group (Holdings) looks to be in line with the rest of the Consumer Durables industry. While the price-to-sales ratio shouldn't be the defining factor in whether you buy a stock or not, it's quite a capable barometer of revenue expectations.

It appears to us that Lisi Group (Holdings) maintains its moderate P/S off the back of its recent three-year growth being in line with the wider industry forecast. 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. Unless the recent medium-term conditions change, they will continue to support the share price at these levels.

You always need to take note of risks, for example - Lisi Group (Holdings) has 3 warning signs we think you should be aware of.

Of course, profitable companies with a history of great earnings growth are generally safer bets. So you may wish to see this free collection of other companies that have reasonable P/E ratios and have grown earnings strongly.

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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.