Ping An Healthcare and Technology Company Limited (HKG:1833) Stock Rockets 30% As Investors Are Less Pessimistic Than Expected

Ping An Healthcare and Technology Company Limited (HKG:1833) shares have had a really impressive month, gaining 30% after a shaky period beforehand. Unfortunately, the gains of the last month did little to right the losses of the last year with the stock still down 30% over that time.

Following the firm bounce in price, given around half the companies in Hong Kong's Consumer Retailing industry have price-to-sales ratios (or "P/S") below 0.6x, you may consider Ping An Healthcare and Technology as a stock to avoid entirely with its 2.9x P/S ratio. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the highly elevated P/S.

View our latest analysis for Ping An Healthcare and Technology

What Does Ping An Healthcare and Technology's Recent Performance Look Like?

Ping An Healthcare and Technology could be doing better as its revenue has been going backwards lately while most other companies have been seeing positive revenue growth. One possibility is that the P/S ratio is high because investors think this poor revenue performance will turn the corner. However, if this isn't the case, investors might get caught out paying too much for the stock.

Want the full picture on analyst estimates for the company? Then our free report on Ping An Healthcare and Technology will help you uncover what's on the horizon.

Do Revenue Forecasts Match The High P/S Ratio?

Ping An Healthcare and Technology's P/S ratio would be typical for a company that's expected to deliver very strong growth, and importantly, perform much better than the industry.

Taking a look back first, the company's revenue growth last year wasn't something to get excited about as it posted a disappointing decline of 19%. This means it has also seen a slide in revenue over the longer-term as revenue is down 43% in total over the last three years. Therefore, it's fair to say the revenue growth recently has been undesirable for the company.

Shifting to the future, estimates from the analysts covering the company suggest revenue should grow by 5.9% each year over the next three years. Meanwhile, the rest of the industry is forecast to expand by 11% per annum, which is noticeably more attractive.

With this information, we find it concerning that Ping An Healthcare and Technology is trading at a P/S higher than the industry. Apparently many investors in the company are way more bullish than analysts indicate and aren't willing to let go of their stock at any price. Only the boldest would assume these prices are sustainable as this level of revenue growth is likely to weigh heavily on the share price eventually.

The Bottom Line On Ping An Healthcare and Technology's P/S

Shares in Ping An Healthcare and Technology have seen a strong upwards swing lately, which has really helped boost its P/S figure. 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.

Despite analysts forecasting some poorer-than-industry revenue growth figures for Ping An Healthcare and Technology, this doesn't appear to be impacting the P/S in the slightest. When we see a weak revenue outlook, we suspect the share price faces a much greater risk of declining, bringing back down the P/S figures. At these price levels, investors should remain cautious, particularly if things don't improve.

The company's balance sheet is another key area for risk analysis. Take a look at our free balance sheet analysis for Ping An Healthcare and Technology with six simple checks on some of these key factors.

If these risks are making you reconsider your opinion on Ping An Healthcare and Technology, 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.