Getting In Cheap On United Company RUSAL, International Public Joint-Stock Company (HKG:486) Is Unlikely

It's not a stretch to say that United Company RUSAL, International Public Joint-Stock Company's (HKG:486) price-to-sales (or "P/S") ratio of 0.4x seems quite "middle-of-the-road" for Metals and Mining companies in Hong Kong, seeing as it matches the P/S ratio of the wider industry. However, investors might be overlooking a clear opportunity or potential setback if there is no rational basis for the P/S.

See our latest analysis for United Company RUSAL International

What Does United Company RUSAL International's P/S Mean For Shareholders?

United Company RUSAL International could be doing better as its revenue has been going backwards lately while most other companies have been seeing positive revenue growth. It might be that many expect the dour revenue performance to strengthen positively, which has kept the P/S from falling. However, if this isn't the case, investors might get caught out paying too much for the stock.

Keen to find out how analysts think United Company RUSAL International'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 United Company RUSAL International?

The only time you'd be comfortable seeing a P/S like United Company RUSAL International's is when the company's growth is tracking the industry closely.

In reviewing the last year of financials, we were disheartened to see the company's revenues fell to the tune of 13%. Still, the latest three year period has seen an excellent 43% overall rise in revenue, in spite of its unsatisfying short-term performance. Although it's been a bumpy ride, it's still fair to say the revenue growth recently has been more than adequate for the company.

Looking ahead now, revenue is anticipated to climb by 5.4% during the coming year according to the sole analyst following the company. With the industry predicted to deliver 14% growth, the company is positioned for a weaker revenue result.

With this information, we find it interesting that United Company RUSAL International is trading at a fairly similar P/S compared to the industry. Apparently many investors in the company are less bearish than analysts indicate and aren't willing to let go of their stock right now. Maintaining these prices will be difficult to achieve as this level of revenue growth is likely to weigh down the shares eventually.

The Key Takeaway

Generally, our preference is to limit the use of the price-to-sales ratio to establishing what the market thinks about the overall health of a company.

When you consider that United Company RUSAL International's revenue growth estimates are fairly muted compared to the broader industry, it's easy to see why we consider it unexpected to be trading at its current P/S ratio. At present, we aren't confident in the P/S as the predicted future revenues aren't likely to support a more positive sentiment for long. A positive change is needed in order to justify the current price-to-sales ratio.

There are also other vital risk factors to consider and we've discovered 3 warning signs for United Company RUSAL International (1 is significant!) that you should be aware of before investing here.

If you're unsure about the strength of United Company RUSAL International's business, why not explore our interactive list of stocks with solid business fundamentals for some other companies you may have missed.

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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