YCIH Green High-Performance Concrete Company Limited's (HKG:1847) Shares Climb 168% But Its Business Is Yet to Catch Up

YCIH Green High-Performance Concrete Company Limited (HKG:1847) shareholders have had their patience rewarded with a 168% share price jump in the last month. The last month tops off a massive increase of 129% in the last year.

Although its price has surged higher, there still wouldn't be many who think YCIH Green High-Performance Concrete's price-to-sales (or "P/S") ratio of 0.6x is worth a mention when it essentially matches the median P/S in Hong Kong's Basic Materials 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.

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See our latest analysis for YCIH Green High-Performance Concrete

How YCIH Green High-Performance Concrete Has Been Performing

For example, consider that YCIH Green High-Performance Concrete's financial performance has been poor lately as its revenue has been in decline. Perhaps investors believe the recent revenue performance is enough to keep in line with the industry, which is keeping the P/S from dropping off. 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 YCIH Green High-Performance Concrete will help you shine a light on its historical performance.

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

There's an inherent assumption that a company should be matching the industry for P/S ratios like YCIH Green High-Performance Concrete's to be considered reasonable.

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 50%. The last three years don't look nice either as the company has shrunk revenue by 66% in aggregate. Accordingly, shareholders would have felt downbeat about the medium-term rates of revenue growth.

In contrast to the company, the rest of the industry is expected to grow by 3.7% over the next year, which really puts the company's recent medium-term revenue decline into perspective.

With this information, we find it concerning that YCIH Green High-Performance Concrete is trading at a fairly similar P/S compared to the industry. Apparently many investors in the company are way less bearish than recent times would indicate and aren't willing to let go of their stock right now. Only the boldest would assume these prices are sustainable as a continuation of recent revenue trends is likely to weigh on the share price eventually.

What Does YCIH Green High-Performance Concrete's P/S Mean For Investors?

YCIH Green High-Performance Concrete's stock has a lot of momentum behind it lately, which has brought its P/S level with the rest of 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.

Our look at YCIH Green High-Performance Concrete revealed its shrinking revenues over the medium-term haven't impacted the P/S as much as we anticipated, given the industry is set to grow. Even though it matches the industry, we're uncomfortable with the current P/S ratio, as this dismal revenue performance is unlikely to support a more positive sentiment for long. Unless the the circumstances surrounding the recent medium-term improve, it wouldn't be wrong to expect a a difficult period ahead for the company's shareholders.

It's always necessary to consider the ever-present spectre of investment risk. We've identified 4 warning signs with YCIH Green High-Performance Concrete (at least 3 which shouldn't be ignored), and understanding them should be part of your investment process.

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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.