S&P International Holding Limited's (HKG:1695) 25% Price Boost Is Out Of Tune With Revenues

S&P International Holding Limited (HKG:1695) shares have continued their recent momentum with a 25% gain in the last month alone. Not all shareholders will be feeling jubilant, since the share price is still down a very disappointing 17% in the last twelve months.

Although its price has surged higher, it's still not a stretch to say that S&P International Holding's price-to-sales (or "P/S") ratio of 0.5x right now seems quite "middle-of-the-road" compared to the Food industry in Hong Kong, seeing as it matches the P/S ratio of the wider industry. However, investors might be overlooking a clear opportunity or potential setback if there is no rational basis for the P/S.

Check out our latest analysis for S&P International Holding

What Does S&P International Holding's P/S Mean For Shareholders?

As an illustration, revenue has deteriorated at S&P International Holding over the last year, which is not ideal at all. Perhaps investors believe the recent revenue performance is enough to keep in line with the industry, which is keeping the P/S from dropping off. If not, then existing shareholders may be a little nervous about the viability of the share price.

Although there are no analyst estimates available for S&P International Holding, take a look at this free data-rich visualisation to see how the company stacks up on earnings, revenue and cash flow.

Is There Some Revenue Growth Forecasted For S&P International Holding?

S&P International Holding's P/S ratio would be typical for a company that's only expected to deliver moderate growth, and importantly, perform in line with the industry.

In reviewing the last year of financials, we were disheartened to see the company's revenues fell to the tune of 16%. That put a dampener on the good run it was having over the longer-term as its three-year revenue growth is still a noteworthy 7.5% in total. Accordingly, while they would have preferred to keep the run going, shareholders would be roughly satisfied with the medium-term rates of revenue growth.

Comparing that to the industry, which is predicted to deliver 6.8% growth in the next 12 months, the company's momentum is weaker, based on recent medium-term annualised revenue results.

With this information, we find it interesting that S&P International Holding is trading at a fairly similar P/S compared to the industry. Apparently many investors in the company are less bearish than recent times would indicate and aren't willing to let go of their stock right now. Maintaining these prices will be difficult to achieve as a continuation of recent revenue trends is likely to weigh down the shares eventually.

The Final Word

S&P International Holding appears to be back in favour with a solid price jump bringing its P/S back in line with other companies in the industry While the price-to-sales ratio shouldn't be the defining factor in whether you buy a stock or not, it's quite a capable barometer of revenue expectations.

Our examination of S&P International Holding revealed its poor three-year revenue trends aren't resulting in a lower P/S as per our expectations, given they look worse than current industry outlook. Right now we are uncomfortable with the P/S as this revenue performance isn't likely to support a more positive sentiment for long. If recent medium-term revenue trends continue, the probability of a share price decline will become quite substantial, placing shareholders at risk.

Having said that, be aware S&P International Holding is showing 2 warning signs in our investment analysis, you should know about.

If these risks are making you reconsider your opinion on S&P International Holding, explore our interactive list of high quality stocks to get an idea of what else is out there.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.