With A 30% Price Drop For Jiading International Group Holdings Ltd (HKG:8153) You'll Still Get What You Pay For

Jiading International Group Holdings Ltd (HKG:8153) shareholders that were waiting for something to happen have been dealt a blow with a 30% share price drop in the last month. The recent drop completes a disastrous twelve months for shareholders, who are sitting on a 59% loss during that time.

Although its price has dipped substantially, when almost half of the companies in Hong Kong's Media industry have price-to-sales ratios (or "P/S") below 0.7x, you may still consider Jiading International Group Holdings as a stock probably not worth researching with its 1.7x P/S ratio. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's as high as it is.

View our latest analysis for Jiading International Group Holdings

What Does Jiading International Group Holdings' Recent Performance Look Like?

Recent times have been quite advantageous for Jiading International Group Holdings as its revenue has been rising very briskly. 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. However, if this isn't the case, investors might get caught out paying too much for the stock.

Want the full picture on earnings, revenue and cash flow for the company? Then our free report on Jiading International Group Holdings will help you shine a light on its historical performance.

How Is Jiading International Group Holdings' Revenue Growth Trending?

The only time you'd be truly comfortable seeing a P/S as high as Jiading International Group 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 48% last year. The latest three year period has also seen an incredible overall rise in revenue, aided by its incredible short-term performance. Accordingly, shareholders would have been over the moon with those medium-term rates of revenue growth.

Comparing that to the industry, which is only predicted to deliver 19% growth in the next 12 months, the company's momentum is stronger based on recent medium-term annualised revenue results.

With this information, we can see why Jiading International Group 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.

The Key Takeaway

Despite the recent share price weakness, Jiading International Group Holdings' P/S remains higher than most other companies in the industry. We'd say the price-to-sales ratio's power isn't primarily as a valuation instrument but rather to gauge current investor sentiment and future expectations.

We've established that Jiading International Group Holdings maintains its high P/S on the strength of its recent three-year growth being higher than the wider industry forecast, as expected. At this stage investors feel the potential continued revenue growth in the future is great enough to warrant an inflated P/S. If recent medium-term revenue trends continue, it's hard to see the share price falling strongly in the near future under these circumstances.

You should always think about risks. Case in point, we've spotted 5 warning signs for Jiading International Group Holdings you should be aware of, and 3 of them are concerning.

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.

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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.