International Business Settlement Holdings Limited (HKG:147) Stocks Shoot Up 30% But Its P/S Still Looks Reasonable

International Business Settlement Holdings Limited (HKG:147) shares have had a really impressive month, gaining 30% after a shaky period beforehand. Taking a wider view, although not as strong as the last month, the full year gain of 11% is also fairly reasonable.

After such a large jump in price, when almost half of the companies in Hong Kong's Real Estate industry have price-to-sales ratios (or "P/S") below 0.5x, you may consider International Business Settlement Holdings as a stock probably not worth researching with its 1.5x P/S ratio. However, the P/S might be high for a reason and it requires further investigation to determine if it's justified.

See our latest analysis for International Business Settlement Holdings

What Does International Business Settlement Holdings' P/S Mean For Shareholders?

International Business Settlement Holdings certainly has been doing a great job lately as it's been growing its revenue at a really rapid pace. It seems that many are expecting the strong revenue performance to beat most other companies over the coming period, which has increased investors’ willingness to pay up for the stock. You'd really hope so, otherwise you're paying a pretty hefty price for no particular reason.

Although there are no analyst estimates available for International Business Settlement Holdings, take a look at this free data-rich visualisation to see how the company stacks up on earnings, revenue and cash flow.

Do Revenue Forecasts Match The High P/S Ratio?

International Business Settlement Holdings' P/S ratio would be typical for a company that's expected to deliver solid growth, and importantly, perform better than the industry.

Taking a look back first, we see that the company's revenues underwent some rampant growth over the last 12 months. The latest three year period has also seen an incredible overall rise in revenue, aided by its incredible short-term performance. Therefore, it's fair to say the revenue growth recently has been superb for the company.

Comparing that to the industry, which is only predicted to deliver 4.8% growth in the next 12 months, the company's momentum is stronger based on recent medium-term annualised revenue results.

With this in consideration, it's not hard to understand why International Business Settlement Holdings' P/S is high relative to its industry peers. It seems most investors are expecting this strong growth to continue and are willing to pay more for the stock.

What We Can Learn From International Business Settlement Holdings' P/S?

International Business Settlement Holdings shares have taken a big step in a northerly direction, but its P/S is elevated as a result. Using the price-to-sales ratio alone to determine if you should sell your stock isn't sensible, however it can be a practical guide to the company's future prospects.

We've established that International Business Settlement Holdings maintains its high P/S on the strength of its recent three-year growth being higher than the wider industry forecast, as expected. In the eyes of shareholders, the probability of a continued growth trajectory is great enough to prevent the P/S from pulling back. Barring any significant changes to the company's ability to make money, the share price should continue to be propped up.

Before you take the next step, you should know about the 2 warning signs for International Business Settlement Holdings that we have uncovered.

If these risks are making you reconsider your opinion on International Business Settlement Holdings, explore our interactive list of high quality stocks to get an idea of what else is out there.

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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.