Some International Business Settlement Holdings Limited (HKG:147) Shareholders Look For Exit As Shares Take 26% Pounding

The International Business Settlement Holdings Limited (HKG:147) share price has fared very poorly over the last month, falling by a substantial 26%. Longer-term, the stock has been solid despite a difficult 30 days, gaining 23% in the last year.

Although its price has dipped substantially, 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 7.2x 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.

Check out our latest analysis for International Business Settlement Holdings

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

For instance, International Business Settlement Holdings' receding revenue in recent times would have to be some food for thought. 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?

There's an inherent assumption that a company should far outperform the industry for P/S ratios like International Business Settlement Holdings' to be considered reasonable.

In reviewing the last year of financials, we were disheartened to see the company's revenues fell to the tune of 78%. The last three years don't look nice either as the company has shrunk revenue by 47% in aggregate. Therefore, it's fair to say the revenue growth recently has been undesirable for the company.

In contrast to the company, the rest of the industry is expected to grow by 5.9% over the next year, which really puts the company's recent medium-term revenue decline into perspective.

With this in mind, we find it worrying that International Business Settlement Holdings' P/S exceeds that of its industry peers. It seems most investors are ignoring the recent poor growth rate and are hoping for a turnaround in the company's business prospects. There's a very good chance existing shareholders are setting themselves up for future disappointment if the P/S falls to levels more in line with the recent negative growth rates.

The Bottom Line On International Business Settlement Holdings' P/S

International Business Settlement Holdings' shares may have suffered, but its P/S remains high. 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 currently trades on a much higher than expected P/S since its recent revenues have been in decline over the medium-term. When we see revenue heading backwards and underperforming the industry forecasts, we feel the possibility of the share price declining is very real, bringing the P/S back into the realm of reasonability. Unless the the circumstances surrounding the recent medium-term improve, it wouldn't be wrong to expect a a difficult period ahead for the company's shareholders.

The company's balance sheet is another key area for risk analysis. You can assess many of the main risks through our free balance sheet analysis for International Business Settlement Holdings with six simple checks.

It's important to make sure you look for a great company, not just the first idea you come across. So if growing profitability aligns with your idea of a great company, take a peek at this free list of interesting companies with strong recent earnings growth (and a low P/E).

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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.