Getting In Cheap On Bradaverse Education (Int'l) Investments Group Limited (HKG:1082) Is Unlikely

Bradaverse Education (Int'l) Investments Group Limited's (HKG:1082) price-to-sales (or "P/S") ratio of 9.3x may look like a poor investment opportunity when you consider close to half the companies in the Consumer Services industry in Hong Kong have P/S ratios below 1.2x. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the highly elevated P/S.

See our latest analysis for Bradaverse Education (Int'l) Investments Group

What Does Bradaverse Education (Int'l) Investments Group's P/S Mean For Shareholders?

The revenue growth achieved at Bradaverse Education (Int'l) Investments Group over the last year would be more than acceptable for most companies. One possibility is that the P/S ratio is high because investors think this respectable revenue growth will be enough to outperform the broader industry in the near future. However, if this isn't the case, investors might get caught out paying too much for the stock.

Although there are no analyst estimates available for Bradaverse Education (Int'l) Investments Group, take a look at this free data-rich visualisation to see how the company stacks up on earnings, revenue and cash flow.

How Is Bradaverse Education (Int'l) Investments Group's Revenue Growth Trending?

There's an inherent assumption that a company should far outperform the industry for P/S ratios like Bradaverse Education (Int'l) Investments Group's to be considered reasonable.

Taking a look back first, we see that the company grew revenue by an impressive 25% last year. The latest three year period has also seen an excellent 75% overall rise in revenue, aided by its short-term performance. So we can start by confirming that the company has done a great job of growing revenue over that time.

Weighing that recent medium-term revenue trajectory against the broader industry's one-year forecast for expansion of 21% shows it's about the same on an annualised basis.

In light of this, it's curious that Bradaverse Education (Int'l) Investments Group's P/S sits above the majority of other companies. Apparently many investors in the company are more bullish than recent times would indicate and aren't willing to let go of their stock right now. Although, additional gains will be difficult to achieve as a continuation of recent revenue trends would weigh down the share price eventually.

The Bottom Line On Bradaverse Education (Int'l) Investments Group's 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.

Our examination of Bradaverse Education (Int'l) Investments Group revealed its three-year revenue trends aren't impacting its high P/S as much as we would have predicted, given they look similar to current industry expectations. Right now we are uncomfortable with the high P/S as this revenue performance isn't likely to support such positive sentiment for long. Unless there is a significant improvement in the company's medium-term trends, it will be difficult to prevent the P/S ratio from declining to a more reasonable level.

There are also other vital risk factors to consider before investing and we've discovered 1 warning sign for Bradaverse Education (Int'l) Investments Group that you should be aware of.

If these risks are making you reconsider your opinion on Bradaverse Education (Int'l) Investments Group, 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.