Market Participants Recognise Health and Happiness (H&H) International Holdings Limited's (HKG:1112) Revenues Pushing Shares 31% Higher

Health and Happiness (H&H) International Holdings Limited (HKG:1112) shareholders have had their patience rewarded with a 31% share price jump in the last month. Unfortunately, despite the strong performance over the last month, the full year gain of 8.6% isn't as attractive.

In spite of the firm bounce in price, there still wouldn't be many who think Health and Happiness (H&H) International Holdings' price-to-sales (or "P/S") ratio of 0.5x is worth a mention when it essentially matches the median P/S in Hong Kong's Food industry. 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.

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Check out our latest analysis for Health and Happiness (H&H) International Holdings

What Does Health and Happiness (H&H) International Holdings' P/S Mean For Shareholders?

While the industry has experienced revenue growth lately, Health and Happiness (H&H) International Holdings' revenue has gone into reverse gear, which is not great. It might be that many expect the dour revenue performance to strengthen positively, which has kept the P/S from falling. If not, then existing shareholders may be a little 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 Health and Happiness (H&H) International Holdings.

Is There Some Revenue Growth Forecasted For Health and Happiness (H&H) International Holdings?

There's an inherent assumption that a company should be matching the industry for P/S ratios like Health and Happiness (H&H) International Holdings' to be considered reasonable.

In reviewing the last year of financials, we were disheartened to see the company's revenues fell to the tune of 6.3%. This has soured the latest three-year period, which nevertheless managed to deliver a decent 13% overall rise in revenue. So we can start by confirming that the company has generally done a good job of growing revenue over that time, even though it had some hiccups along the way.

Turning to the outlook, the next three years should generate growth of 6.0% each year as estimated by the seven analysts watching the company. Meanwhile, the rest of the industry is forecast to expand by 5.6% per year, which is not materially different.

With this information, we can see why Health and Happiness (H&H) International Holdings is trading at a fairly similar P/S to the industry. It seems most investors are expecting to see average future growth and are only willing to pay a moderate amount for the stock.

The Final Word

Health and Happiness (H&H) International Holdings 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.

A Health and Happiness (H&H) International Holdings' P/S seems about right to us given the knowledge that analysts are forecasting a revenue outlook that is similar to the Food industry. At this stage investors feel the potential for an improvement or deterioration in revenue isn't great enough to push P/S in a higher or lower direction. All things considered, if the P/S and revenue estimates contain no major shocks, then it's hard to see the share price moving strongly in either direction in the near future.

There are also other vital risk factors to consider before investing and we've discovered 1 warning sign for Health and Happiness (H&H) International Holdings that you should be aware of.

It's important to make sure you look for a great company, not just the first idea you come across. So if growing profitability aligns with your idea of a great company, take a peek at this free list of interesting companies with strong recent earnings growth (and a low P/E).

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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.