Even With A 26% Surge, Cautious Investors Are Not Rewarding Dekon Food and Agriculture Group's (HKG:2419) Performance Completely

Dekon Food and Agriculture Group (HKG:2419) shareholders have had their patience rewarded with a 26% 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 32% over that time.

In spite of the firm bounce in price, there still wouldn't be many who think Dekon Food and Agriculture Group's price-to-sales (or "P/S") ratio of 0.6x is worth a mention when the median P/S in Hong Kong's Food industry is similar at about 0.5x. 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.

Check out our latest analysis for Dekon Food and Agriculture Group

What Does Dekon Food and Agriculture Group's P/S Mean For Shareholders?

Dekon Food and Agriculture Group certainly has been doing a good job lately as it's been growing revenue more than most other companies. One possibility is that the P/S ratio is moderate because investors think this strong revenue performance might be about to tail off. 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.

Keen to find out how analysts think Dekon Food and Agriculture Group's future stacks up against the industry? In that case, our free report is a great place to start.

How Is Dekon Food and Agriculture Group's Revenue Growth Trending?

In order to justify its P/S ratio, Dekon Food and Agriculture Group would need to produce growth that's similar to the industry.

If we review the last year of revenue growth, the company posted a terrific increase of 39%. The latest three year period has also seen an excellent 127% overall rise in revenue, aided by its short-term performance. Accordingly, shareholders would have definitely welcomed those medium-term rates of revenue growth.

Looking ahead now, revenue is anticipated to climb by 18% per annum during the coming three years according to the dual analysts following the company. With the industry only predicted to deliver 4.1% per annum, the company is positioned for a stronger revenue result.

With this information, we find it interesting that Dekon Food and Agriculture Group is trading at a fairly similar P/S compared to the industry. Apparently some shareholders are skeptical of the forecasts and have been accepting lower selling prices.

The Key Takeaway

Dekon Food and Agriculture Group 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.

Despite enticing revenue growth figures that outpace the industry, Dekon Food and Agriculture Group's P/S isn't quite what we'd expect. There could be some risks that the market is pricing in, which is preventing the P/S ratio from matching the positive outlook. However, if you agree with the analysts' forecasts, you may be able to pick up the stock at an attractive price.

It is also worth noting that we have found 2 warning signs for Dekon Food and Agriculture Group that you need to take into consideration.

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.