Ping An Healthcare and Technology Company Limited (HKG:1833) Stock Rockets 28% As Investors Are Less Pessimistic Than Expected

Ping An Healthcare and Technology Company Limited (HKG:1833) shares have continued their recent momentum with a 28% gain in the last month alone. Unfortunately, the gains of the last month did little to right the losses of the last year with the stock still down 19% over that time.

Since its price has surged higher, when almost half of 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 not worth researching with its 3.4x P/S ratio. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's so lofty.

See our latest analysis for Ping An Healthcare and Technology

How Has Ping An Healthcare and Technology Performed Recently?

Ping An Healthcare and Technology hasn't been tracking well recently as its declining revenue compares poorly to other companies, which have seen some growth in their revenues on average. It might be that many expect the dour revenue performance to recover substantially, which has kept the P/S from collapsing. If not, then existing shareholders may be extremely nervous about the viability of the share price.

If you'd like to see what analysts are forecasting going forward, you should check out our free report on Ping An Healthcare and Technology.

Is There Enough Revenue Growth Forecasted For Ping An Healthcare and Technology?

In order to justify its P/S ratio, Ping An Healthcare and Technology would need to produce outstanding growth that's well in excess of the industry.

Retrospectively, the last year delivered a frustrating 19% decrease to the company's top line. 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 8.4% each year over the next three years. That's shaping up to be similar to the 6.8% per annum growth forecast for the broader industry.

With this in consideration, we find it intriguing that Ping An Healthcare and Technology's P/S is higher than its industry peers. It seems most investors are ignoring the fairly average growth expectations and are willing to pay up for exposure to the stock. Although, additional gains will be difficult to achieve as this level of revenue growth is likely to weigh down the share price eventually.

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

The strong share price surge has lead to Ping An Healthcare and Technology's P/S soaring as well. 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.

Analysts are forecasting Ping An Healthcare and Technology's revenues to only grow on par with the rest of the industry, which has lead to the high P/S ratio being unexpected. The fact that the revenue figures aren't setting the world alight has us doubtful that the company's elevated P/S can be sustainable for the long term. This places shareholders' investments at risk and potential investors in danger of paying an unnecessary premium.

A lot of potential risks can sit within a company's balance sheet. 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 you're unsure about the strength of Ping An Healthcare and Technology's business, why not explore our interactive list of stocks with solid business fundamentals for some other companies you may have missed.

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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.