Times Universal Group Holdings Limited's (HKG:2310) Shares Leap 146% Yet They're Still Not Telling The Full Story

Times Universal Group Holdings Limited (HKG:2310) shares have had a really impressive month, gaining 146% after a shaky period beforehand. Looking back a bit further, it's encouraging to see the stock is up 42% in the last year.

Even after such a large jump in price, you could still be forgiven for feeling indifferent about Times Universal Group Holdings' P/S ratio of 0.7x, since the median price-to-sales (or "P/S") ratio for the Real Estate industry in Hong Kong is also close to 0.6x. While this might not raise any eyebrows, if the P/S ratio is not justified investors could be missing out on a potential opportunity or ignoring looming disappointment.

View our latest analysis for Times Universal Group Holdings

What Does Times Universal Group Holdings' P/S Mean For Shareholders?

Times Universal Group Holdings has been doing a decent job lately as it's been growing revenue at a reasonable pace. One possibility is that the P/S is moderate because investors think this good revenue growth might only be parallel to the broader industry in the near future. If you like the company, you'd be hoping this isn't the case so that you could potentially pick up some stock while it's not quite in favour.

We don't have analyst forecasts, but you can see how recent trends are setting up the company for the future by checking out our free report on Times Universal Group Holdings' earnings, revenue and cash flow.

What Are Revenue Growth Metrics Telling Us About The P/S?

There's an inherent assumption that a company should be matching the industry for P/S ratios like Times Universal Group Holdings' to be considered reasonable.

If we review the last year of revenue growth, the company posted a worthy increase of 5.7%. The latest three year period has also seen an excellent 73% overall rise in revenue, aided somewhat by its short-term performance. So we can start by confirming that the company has done a great job of growing revenues over that time.

When compared to the industry's one-year growth forecast of 3.9%, the most recent medium-term revenue trajectory is noticeably more alluring

In light of this, it's curious that Times Universal Group Holdings' P/S sits in line with the majority of other companies. It may be that most investors are not convinced the company can maintain its recent growth rates.

The Key Takeaway

Times Universal Group Holdings' stock has a lot of momentum behind it lately, which has brought its P/S level with the rest of the industry. Typically, we'd caution against reading too much into price-to-sales ratios when settling on investment decisions, though it can reveal plenty about what other market participants think about the company.

We've established that Times Universal Group Holdings currently trades on a lower than expected P/S since its recent three-year growth is higher than the wider industry forecast. It'd be fair to assume that potential risks the company faces could be the contributing factor to the lower than expected P/S. While recent revenue trends over the past medium-term suggest that the risk of a price decline is low, investors appear to see the likelihood of revenue fluctuations in the future.

We don't want to rain on the parade too much, but we did also find 3 warning signs for Times Universal Group Holdings that you need to be mindful of.

If you're unsure about the strength of Times Universal Group 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.