Vitasoy International Holdings Limited (HKG:345) Shares May Have Slumped 25% But Getting In Cheap Is Still Unlikely

Vitasoy International Holdings Limited (HKG:345) shareholders that were waiting for something to happen have been dealt a blow with a 25% share price drop in the last month. For any long-term shareholders, the last month ends a year to forget by locking in a 59% share price decline.

In spite of the heavy fall in price, when almost half of the companies in Hong Kong's Food industry have price-to-sales ratios (or "P/S") below 0.5x, you may still consider Vitasoy International Holdings as a stock probably not worth researching with its 1.2x P/S ratio. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the elevated P/S.

Check out our latest analysis for Vitasoy International Holdings

What Does Vitasoy International Holdings' Recent Performance Look Like?

Vitasoy International Holdings could be doing better as its revenue has been going backwards lately while most other companies have been seeing positive revenue growth. It might be that many expect the dour revenue performance to recover substantially, which has kept the P/S from collapsing. If not, then existing shareholders may be extremely nervous about the viability of the share price.

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

How Is Vitasoy International Holdings' Revenue Growth Trending?

There's an inherent assumption that a company should outperform the industry for P/S ratios like Vitasoy 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 6.9%. The last three years don't look nice either as the company has shrunk revenue by 12% in aggregate. Therefore, it's fair to say the revenue growth recently has been undesirable for the company.

Looking ahead now, revenue is anticipated to climb by 4.6% during the coming year according to the four analysts following the company. That's shaping up to be materially lower than the 7.8% growth forecast for the broader industry.

With this in consideration, we believe it doesn't make sense that Vitasoy International Holdings' P/S is outpacing its industry peers. Apparently many investors in the company are way more bullish than analysts indicate and aren't willing to let go of their stock at any price. There's a good chance these shareholders are setting themselves up for future disappointment if the P/S falls to levels more in line with the growth outlook.

The Final Word

There's still some elevation in Vitasoy International Holdings' P/S, even if the same can't be said for its share price recently. 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.

Despite analysts forecasting some poorer-than-industry revenue growth figures for Vitasoy International Holdings, this doesn't appear to be impacting the P/S in the slightest. When we see a weak revenue outlook, we suspect the share price faces a much greater risk of declining, bringing back down the P/S figures. At these price levels, investors should remain cautious, particularly if things don't improve.

Having said that, be aware Vitasoy International Holdings is showing 1 warning sign in our investment analysis, you should know about.

If these risks are making you reconsider your opinion on Vitasoy International 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.