International Business Settlement Holdings Limited's (HKG:147) Share Price Is Still Matching Investor Opinion Despite 37% Slump

Unfortunately for some shareholders, the International Business Settlement Holdings Limited (HKG:147) share price has dived 37% in the last thirty days, prolonging recent pain. For any long-term shareholders, the last month ends a year to forget by locking in a 56% share price decline.

In spite of the heavy fall in price, when almost half of the companies in Hong Kong's Real Estate industry have price-to-sales ratios (or "P/S") below 0.6x, you may still consider International Business Settlement Holdings as a stock not worth researching with its 3.7x P/S ratio. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the highly elevated P/S.

View our latest analysis for International Business Settlement Holdings

What Does International Business Settlement Holdings' Recent Performance Look Like?

As an illustration, revenue has deteriorated at International Business Settlement Holdings over the last year, which is not ideal at all. It might be that many expect the company to still outplay most other companies over the coming period, which has kept the P/S from collapsing. 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.

Is There Enough Revenue Growth Forecasted For International Business Settlement Holdings?

In order to justify its P/S ratio, International Business Settlement Holdings would need to produce outstanding growth that's well in excess of the industry.

In reviewing the last year of financials, we were disheartened to see the company's revenues fell to the tune of 79%. However, a few very strong years before that means that it was still able to grow revenue by an impressive 103% in total over the last three years. So we can start by confirming that the company has generally done a very good job of growing revenue over that time, even though it had some hiccups along the way.

Comparing that recent medium-term revenue trajectory with the industry's one-year growth forecast of 5.5% shows it's noticeably more attractive.

With this information, we can see why International Business Settlement 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 Final Word

A significant share price dive has done very little to deflate International Business Settlement Holdings' very lofty P/S. 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.

It's no surprise that International Business Settlement Holdings can support its high P/S given the strong revenue growth its experienced over the last three-year is superior to the current industry outlook. Right now shareholders are comfortable with the P/S as they are quite confident revenue aren't under threat. Unless the recent medium-term conditions change, they will continue to provide strong support to the share price.

Don't forget that there may be other risks. For instance, we've identified 2 warning signs for International Business Settlement Holdings (1 is potentially serious) you should be aware of.

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

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.