Market Cool On Archosaur Games Inc.'s (HKG:9990) Revenues

When close to half the companies operating in the Entertainment industry in Hong Kong have price-to-sales ratios (or "P/S") above 1.7x, you may consider Archosaur Games Inc. (HKG:9990) as an attractive investment with its 1.1x P/S ratio. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the reduced P/S.

Check out our latest analysis for Archosaur Games

How Archosaur Games Has Been Performing

Recent times haven't been great for Archosaur Games as its revenue has been rising slower than most other companies. It seems that many are expecting the uninspiring revenue performance to persist, which has repressed the growth of the P/S ratio. If you still like the company, you'd be hoping revenue doesn't get any worse and that you could pick up some stock while it's out of favour.

If you'd like to see what analysts are forecasting going forward, you should check out our free report on Archosaur Games.

Is There Any Revenue Growth Forecasted For Archosaur Games?

The only time you'd be truly comfortable seeing a P/S as low as Archosaur Games' is when the company's growth is on track to lag the industry.

Retrospectively, the last year delivered an exceptional 56% gain to the company's top line. Despite this strong recent growth, it's still struggling to catch up as its three-year revenue frustratingly shrank by 25% overall. So unfortunately, we have to acknowledge that the company has not done a great job of growing revenues over that time.

Turning to the outlook, the next year should generate growth of 32% as estimated by the one analyst watching the company. That's shaping up to be materially higher than the 20% growth forecast for the broader industry.

With this in consideration, we find it intriguing that Archosaur Games' P/S sits behind most of its industry peers. It looks like most investors are not convinced at all that the company can achieve future growth expectations.

What Does Archosaur Games' P/S Mean For Investors?

It's argued the price-to-sales ratio is an inferior measure of value within certain industries, but it can be a powerful business sentiment indicator.

A look at Archosaur Games' revenues reveals that, despite glowing future growth forecasts, its P/S is much lower than we'd expect. The reason for this depressed P/S could potentially be found in the risks the market is pricing in. At least price risks look to be very low, but investors seem to think future revenues could see a lot of volatility.

Don't forget that there may be other risks. For instance, we've identified 1 warning sign for Archosaur Games that you should be aware of.

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.