Future Bright Mining Holdings Limited's (HKG:2212) 31% Jump Shows Its Popularity With Investors

Future Bright Mining Holdings Limited (HKG:2212) shareholders are no doubt pleased to see that the share price has bounced 31% in the last month, although it is still struggling to make up recently lost ground. Unfortunately, the gains of the last month did little to right the losses of the last year with the stock still down 42% over that time.

Following the firm bounce in price, when almost half of the companies in Hong Kong's Basic Materials industry have price-to-sales ratios (or "P/S") below 0.5x, you may consider Future Bright Mining 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 Future Bright Mining Holdings

How Has Future Bright Mining Holdings Performed Recently?

Future Bright Mining Holdings certainly has been doing a great job lately as it's been growing its revenue at a really rapid pace. The P/S ratio is probably high because investors think this strong revenue growth will be enough to outperform the broader industry in the near future. You'd really hope so, otherwise you're paying a pretty hefty price for no particular reason.

We don't have analyst forecasts, but you can see how recent trends are setting up the company for the future by checking out our free report on Future Bright Mining Holdings' earnings, revenue and cash flow.

Is There Enough Revenue Growth Forecasted For Future Bright Mining Holdings?

The only time you'd be truly comfortable seeing a P/S as high as Future Bright Mining Holdings' is when the company's growth is on track to outshine the industry.

Taking a look back first, we see that the company grew revenue by an impressive 78% last year. Pleasingly, revenue has also lifted 181% in aggregate from three years ago, thanks to the last 12 months of growth. Therefore, it's fair to say the revenue growth recently has been superb for the company.

When compared to the industry's one-year growth forecast of 7.9%, the most recent medium-term revenue trajectory is noticeably more alluring

With this information, we can see why Future Bright Mining Holdings is trading at such a high P/S compared to the industry. It seems most investors are expecting this strong growth to continue and are willing to pay more for the stock.

What Does Future Bright Mining Holdings' P/S Mean For Investors?

Future Bright Mining Holdings' P/S is on the rise since its shares have risen strongly. 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.

As we suspected, our examination of Future Bright Mining Holdings revealed its three-year revenue trends are contributing to its high P/S, given they look better than current industry expectations. Right now shareholders are comfortable with the P/S as they are quite confident revenue aren't under threat. Unless the recent medium-term conditions change, they will continue to provide strong support to the share price.

It is also worth noting that we have found 2 warning signs for Future Bright Mining Holdings that you need to take into consideration.

Of course, profitable companies with a history of great earnings growth are generally safer bets. So you may wish to see this free collection of other companies that have reasonable P/E ratios and have grown earnings strongly.

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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.