Travel Expert (Asia) Enterprises Limited (HKG:1235) Stock Rockets 29% But Many Are Still Ignoring The Company

Travel Expert (Asia) Enterprises Limited (HKG:1235) shareholders would be excited to see that the share price has had a great month, posting a 29% gain and recovering from prior weakness. Longer-term shareholders would be thankful for the recovery in the share price since it's now virtually flat for the year after the recent bounce.

Although its price has surged higher, it's still not a stretch to say that Travel Expert (Asia) Enterprises' price-to-sales (or "P/S") ratio of 0.5x right now seems quite "middle-of-the-road" compared to the Hospitality industry in Hong Kong, where the median P/S ratio is around 0.7x. Although, it's not wise to simply ignore the P/S without explanation as investors may be disregarding a distinct opportunity or a costly mistake.

See our latest analysis for Travel Expert (Asia) Enterprises

How Travel Expert (Asia) Enterprises Has Been Performing

Recent times have been quite advantageous for Travel Expert (Asia) Enterprises as its revenue has been rising very briskly. It might be that many expect the strong revenue performance to wane, which has kept the share price, and thus the P/S ratio, from rising. 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 not quite in favour.

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

How Is Travel Expert (Asia) Enterprises' Revenue Growth Trending?

In order to justify its P/S ratio, Travel Expert (Asia) Enterprises would need to produce growth that's similar to the industry.

If we review the last year of revenue growth, we see the company's revenues grew exponentially. The latest three year period has also seen an incredible overall rise in revenue, aided by its incredible short-term performance. Accordingly, shareholders would have been over the moon with those medium-term rates of revenue growth.

Comparing that recent medium-term revenue trajectory with the industry's one-year growth forecast of 16% shows it's noticeably more attractive.

With this information, we find it interesting that Travel Expert (Asia) Enterprises is trading at a fairly similar P/S compared to the industry. It may be that most investors are not convinced the company can maintain its recent growth rates.

What Does Travel Expert (Asia) Enterprises' P/S Mean For Investors?

Travel Expert (Asia) Enterprises appears to be back in favour with a solid price jump bringing its P/S back in line with other companies in the industry Typically, we'd caution against reading too much into price-to-sales ratios when settling on investment decisions, though it can reveal plenty about what other market participants think about the company.

We didn't quite envision Travel Expert (Asia) Enterprises' P/S sitting in line with the wider industry, considering the revenue growth over the last three-year is higher than the current industry outlook. When we see strong revenue with faster-than-industry growth, we can only assume potential risks are what might be placing pressure on the P/S ratio. At least the risk of a price drop looks to be subdued if recent medium-term revenue trends continue, but investors seem to think future revenue could see some volatility.

There are also other vital risk factors to consider before investing and we've discovered 3 warning signs for Travel Expert (Asia) Enterprises that 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.