Arrail Group Limited's (HKG:6639) Share Price Is Still Matching Investor Opinion Despite 28% Slump

Arrail Group Limited (HKG:6639) shareholders that were waiting for something to happen have been dealt a blow with a 28% share price drop in the last month. Instead of being rewarded, shareholders who have already held through the last twelve months are now sitting on a 45% share price drop.

In spite of the heavy fall in price, there still wouldn't be many who think Arrail Group's price-to-sales (or "P/S") ratio of 1x is worth a mention when it essentially matches the median P/S in Hong Kong's Healthcare 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.

See our latest analysis for Arrail Group

How Arrail Group Has Been Performing

Arrail 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 not, then existing shareholders have reason to be feeling optimistic about the future direction of the share price.

If you'd like to see what analysts are forecasting going forward, you should check out our free report on Arrail Group.

What Are Revenue Growth Metrics Telling Us About The P/S?

Arrail Group'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.

If we review the last year of revenue growth, the company posted a terrific increase of 18%. The latest three year period has also seen a 15% overall rise in revenue, aided extensively by its short-term performance. Therefore, it's fair to say the revenue growth recently has been respectable for the company.

Looking ahead now, revenue is anticipated to climb by 15% per year during the coming three years according to the three analysts following the company. That's shaping up to be similar to the 15% per annum growth forecast for the broader industry.

With this in mind, it makes sense that Arrail Group's P/S is closely matching its industry peers. Apparently shareholders are comfortable to simply hold on while the company is keeping a low profile.

The Bottom Line On Arrail Group's P/S

With its share price dropping off a cliff, the P/S for Arrail Group looks to be in line with the rest of the Healthcare 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.

A Arrail Group's P/S seems about right to us given the knowledge that analysts are forecasting a revenue outlook that is similar to the Healthcare industry. Right now shareholders are comfortable with the P/S as they are quite confident future revenue won't throw up any surprises. Unless these conditions change, they will continue to support the share price at these levels.

A lot of potential risks can sit within a company's balance sheet. You can assess many of the main risks through our free balance sheet analysis for Arrail Group with six simple checks.

If these risks are making you reconsider your opinion on Arrail Group, 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.

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