With China Reinsurance (Group) Corporation (HKG:1508) It Looks Like You'll Get What You Pay For

It's not a stretch to say that China Reinsurance (Group) Corporation's (HKG:1508) price-to-sales (or "P/S") ratio of 0.2x right now seems quite "middle-of-the-road" for companies in the Insurance industry in Hong Kong, where the median P/S ratio is around 0.4x. 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.

View our latest analysis for China Reinsurance (Group)

How Has China Reinsurance (Group) Performed Recently?

China Reinsurance (Group) could be doing better as it's been growing revenue less than most other companies lately. One possibility is that the P/S ratio is moderate because investors think this lacklustre revenue performance will turn around. If not, then existing shareholders may be a little nervous about the viability of the share price.

Keen to find out how analysts think China Reinsurance (Group)'s future stacks up against the industry? In that case, our free report is a great place to start.

Is There Some Revenue Growth Forecasted For China Reinsurance (Group)?

There's an inherent assumption that a company should be matching the industry for P/S ratios like China Reinsurance (Group)'s to be considered reasonable.

Taking a look back first, we see that the company grew revenue by an impressive 19% last year. Still, revenue has fallen 44% in total from three years ago, which is quite disappointing. So unfortunately, we have to acknowledge that the company has not done a great job of growing revenues over that time.

Looking ahead now, revenue is anticipated to climb by 17% per annum during the coming three years according to the three analysts following the company. That's shaping up to be similar to the 16% per year growth forecast for the broader industry.

In light of this, it's understandable that China Reinsurance (Group)'s P/S sits in line with the majority of other companies. Apparently shareholders are comfortable to simply hold on while the company is keeping a low profile.

What We Can Learn From China Reinsurance (Group)'s P/S?

Using the price-to-sales ratio alone to determine if you should sell your stock isn't sensible, however it can be a practical guide to the company's future prospects.

Our look at China Reinsurance (Group)'s revenue growth estimates show that its P/S is about what we expect, as both metrics follow closely with the industry averages. At this stage investors feel the potential for an improvement or deterioration in revenue isn't great enough to push P/S in a higher or lower direction. Unless these conditions change, they will continue to support the share price at these levels.

And what about other risks? Every company has them, and we've spotted 1 warning sign for China Reinsurance (Group) you should know about.

If companies with solid past earnings growth is up your alley, you may wish to see this free collection of other companies with strong earnings growth and low P/E ratios.

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.

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