Improved Revenues Required Before Orange Sky Golden Harvest Entertainment (Holdings) Limited (HKG:1132) Stock's 36% Jump Looks Justified

The Orange Sky Golden Harvest Entertainment (Holdings) Limited (HKG:1132) share price has done very well over the last month, posting an excellent gain of 36%. Unfortunately, the gains of the last month did little to right the losses of the last year with the stock still down 28% over that time.

Even after such a large jump in price, Orange Sky Golden Harvest Entertainment (Holdings) may still be sending buy signals at present with its price-to-sales (or "P/S") ratio of 0.2x, considering almost half of all companies in the Entertainment industry in Hong Kong have P/S ratios greater than 1.8x and even P/S higher than 4x aren't out of the ordinary. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's limited.

Check out our latest analysis for Orange Sky Golden Harvest Entertainment (Holdings)

What Does Orange Sky Golden Harvest Entertainment (Holdings)'s Recent Performance Look Like?

Revenue has risen firmly for Orange Sky Golden Harvest Entertainment (Holdings) recently, which is pleasing to see. It might be that many expect the respectable revenue performance to degrade substantially, which has repressed the P/S. Those who are bullish on Orange Sky Golden Harvest Entertainment (Holdings) will be hoping that this isn't the case, so that they can pick up the stock at a lower valuation.

Want the full picture on earnings, revenue and cash flow for the company? Then our free report on Orange Sky Golden Harvest Entertainment (Holdings) will help you shine a light on its historical performance.

How Is Orange Sky Golden Harvest Entertainment (Holdings)'s Revenue Growth Trending?

There's an inherent assumption that a company should underperform the industry for P/S ratios like Orange Sky Golden Harvest Entertainment (Holdings)'s to be considered reasonable.

Retrospectively, the last year delivered an exceptional 17% gain to the company's top line. 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.

Comparing the recent medium-term revenue trends against the industry's one-year growth forecast of 45% shows it's noticeably less attractive.

In light of this, it's understandable that Orange Sky Golden Harvest Entertainment (Holdings)'s P/S sits below the majority of other companies. Apparently many shareholders weren't comfortable holding on to something they believe will continue to trail the wider industry.

The Bottom Line On Orange Sky Golden Harvest Entertainment (Holdings)'s P/S

Despite Orange Sky Golden Harvest Entertainment (Holdings)'s share price climbing recently, its P/S still lags most other companies. 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.

Our examination of Orange Sky Golden Harvest Entertainment (Holdings) confirms that the company's revenue trends over the past three-year years are a key factor in its low price-to-sales ratio, as we suspected, given they fall short of current industry expectations. At this stage investors feel the potential for an improvement in revenue isn't great enough to justify a higher P/S ratio. If recent medium-term revenue trends continue, it's hard to see the share price experience a reversal of fortunes anytime soon.

We don't want to rain on the parade too much, but we did also find 3 warning signs for Orange Sky Golden Harvest Entertainment (Holdings) (2 are a bit concerning!) that you need to be mindful of.

If you're unsure about the strength of Orange Sky Golden Harvest Entertainment (Holdings)'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.