Not Many Are Piling Into Chia Tai Enterprises International Limited (HKG:3839) Just Yet

There wouldn't be many who think Chia Tai Enterprises International Limited's (HKG:3839) price-to-sales (or "P/S") ratio of 0.2x is worth a mention when the median P/S for the Food industry in Hong Kong is similar at about 0.5x. While this might not raise any eyebrows, if the P/S ratio is not justified investors could be missing out on a potential opportunity or ignoring looming disappointment.

See our latest analysis for Chia Tai Enterprises International

What Does Chia Tai Enterprises International's P/S Mean For Shareholders?

As an illustration, revenue has deteriorated at Chia Tai Enterprises International over the last year, which is not ideal at all. One possibility is that the P/S is moderate because investors think the company might still do enough to be in line with the broader industry in the near future. If you like the company, you'd at least be hoping this is the case so that you could potentially pick up some stock while it's not quite in favour.

Want the full picture on earnings, revenue and cash flow for the company? Then our free report on Chia Tai Enterprises International will help you shine a light on its historical performance.

How Is Chia Tai Enterprises International's Revenue Growth Trending?

Chia Tai Enterprises International'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.

Taking a look back first, the company's revenue growth last year wasn't something to get excited about as it posted a disappointing decline of 5.0%. However, a few very strong years before that means that it was still able to grow revenue by an impressive 59% in total over the last three years. So we can start by confirming that the company has generally done a very good job of growing revenue over that time, even though it had some hiccups along the way.

When compared to the industry's one-year growth forecast of 6.8%, the most recent medium-term revenue trajectory is noticeably more alluring

In light of this, it's curious that Chia Tai Enterprises International's P/S sits in line with the majority of other companies. Apparently some shareholders believe the recent performance is at its limits and have been accepting lower selling prices.

The Bottom Line On Chia Tai Enterprises International's P/S

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 didn't quite envision Chia Tai Enterprises International's P/S sitting in line with the wider industry, considering the revenue growth over the last three-year is higher than the current industry outlook. When we see strong revenue with faster-than-industry growth, we can only assume potential risks are what might be placing pressure on the P/S ratio. At least the risk of a price drop looks to be subdued if recent medium-term revenue trends continue, but investors seem to think future revenue could see some volatility.

Before you settle on your opinion, we've discovered 3 warning signs for Chia Tai Enterprises International (1 is a bit concerning!) that you should be aware of.

If these risks are making you reconsider your opinion on Chia Tai Enterprises International, 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.