Investors Appear Satisfied With Haichang Ocean Park Holdings Ltd.'s (HKG:2255) Prospects As Shares Rocket 29%

Haichang Ocean Park Holdings Ltd. (HKG:2255) shareholders have had their patience rewarded with a 29% share price jump in the last month. Unfortunately, the gains of the last month did little to right the losses of the last year with the stock still down 23% over that time.

Following the firm bounce in price, when almost half of the companies in Hong Kong's Hospitality industry have price-to-sales ratios (or "P/S") below 0.7x, you may consider Haichang Ocean Park Holdings as a stock not worth researching with its 3.5x 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.

View our latest analysis for Haichang Ocean Park Holdings

How Has Haichang Ocean Park Holdings Performed Recently?

Haichang Ocean Park Holdings certainly has been doing a good job lately as it's been growing revenue more than most other companies. The P/S is probably high because investors think this strong revenue performance will continue. If not, then existing shareholders might be a little nervous about the viability of the share price.

Keen to find out how analysts think Haichang Ocean Park Holdings' future stacks up against the industry? In that case, our free report is a great place to start.

Is There Enough Revenue Growth Forecasted For Haichang Ocean Park Holdings?

The only time you'd be truly comfortable seeing a P/S as steep as Haichang Ocean Park Holdings' is when the company's growth is on track to outshine the industry decidedly.

If we review the last year of revenue growth, the company posted a terrific increase of 45%. However, this wasn't enough as the latest three year period has seen the company endure a nasty 14% drop in revenue in aggregate. So unfortunately, we have to acknowledge that the company has not done a great job of growing revenues over that time.

Turning to the outlook, the next year should generate growth of 50% as estimated by the only analyst watching the company. That's shaping up to be materially higher than the 16% growth forecast for the broader industry.

With this information, we can see why Haichang Ocean Park Holdings is trading at such a high P/S compared to the industry. Apparently shareholders aren't keen to offload something that is potentially eyeing a more prosperous future.

The Final Word

The strong share price surge has lead to Haichang Ocean Park Holdings' P/S soaring as well. It's argued the price-to-sales ratio is an inferior measure of value within certain industries, but it can be a powerful business sentiment indicator.

We've established that Haichang Ocean Park Holdings maintains its high P/S on the strength of its forecasted revenue growth being higher than the the rest of the Hospitality industry, as expected. At this stage investors feel the potential for a deterioration in revenues is quite remote, justifying the elevated P/S ratio. Unless the analysts have really missed the mark, these strong revenue forecasts should keep the share price buoyant.

A lot of potential risks can sit within a company's balance sheet. Take a look at our free balance sheet analysis for Haichang Ocean Park Holdings with six simple checks on some of these key factors.

If these risks are making you reconsider your opinion on Haichang Ocean Park Holdings, 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.