Investors Still Waiting For A Pull Back In Shimao Services Holdings Limited (HKG:873)

There wouldn't be many who think Shimao Services Holdings Limited's (HKG:873) price-to-sales (or "P/S") ratio of 0.3x is worth a mention when the median P/S for the Real Estate industry in Hong Kong is similar at about 0.6x. Although, it's not wise to simply ignore the P/S without explanation as investors may be disregarding a distinct opportunity or a costly mistake.

Check out our latest analysis for Shimao Services Holdings

What Does Shimao Services Holdings' P/S Mean For Shareholders?

Shimao Services Holdings hasn't been tracking well recently as its declining revenue compares poorly to other companies, which have seen some growth in their revenues on average. Perhaps the market is expecting its poor revenue performance to improve, keeping the P/S from dropping. You'd really hope so, otherwise you're paying a relatively elevated price for a company with this sort of growth profile.

Want the full picture on analyst estimates for the company? Then our free report on Shimao Services Holdings will help you uncover what's on the horizon.

Do Revenue Forecasts Match The P/S Ratio?

There's an inherent assumption that a company should be matching the industry for P/S ratios like Shimao Services 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 3.9%. This has soured the latest three-year period, which nevertheless managed to deliver a decent 12% overall rise in revenue. Although it's been a bumpy ride, it's still fair to say the revenue growth recently has been mostly respectable for the company.

Looking ahead now, revenue is anticipated to climb by 4.8% during the coming year according to the three analysts following the company. With the industry predicted to deliver 5.2% growth , the company is positioned for a comparable revenue result.

In light of this, it's understandable that Shimao Services Holdings' P/S sits in line with the majority of other companies. Apparently shareholders are comfortable to simply hold on while the company is keeping a low profile.

What Does Shimao Services Holdings' P/S Mean For Investors?

Generally, our preference is to limit the use of the price-to-sales ratio to establishing what the market thinks about the overall health of a company.

A Shimao Services Holdings' P/S seems about right to us given the knowledge that analysts are forecasting a revenue outlook that is similar to the Real Estate industry. Right now shareholders are comfortable with the P/S as they are quite confident future revenue won't throw up any surprises. Unless these conditions change, they will continue to support the share price at these levels.

The company's balance sheet is another key area for risk analysis. Take a look at our free balance sheet analysis for Shimao Services Holdings with six simple checks on some of these key factors.

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

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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.