Revenues Not Telling The Story For Apollo Future Mobility Group Limited (HKG:860) After Shares Rise 29%

Despite an already strong run, Apollo Future Mobility Group Limited (HKG:860) shares have been powering on, with a gain of 29% in the last thirty days. Looking back a bit further, it's encouraging to see the stock is up 62% in the last year.

After such a large jump in price, you could be forgiven for thinking Apollo Future Mobility Group is a stock not worth researching with a price-to-sales ratios (or "P/S") of 2.8x, considering almost half the companies in Hong Kong's Retail Distributors industry have P/S ratios below 0.8x. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the elevated P/S.

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See our latest analysis for Apollo Future Mobility Group

How Apollo Future Mobility Group Has Been Performing

The revenue growth achieved at Apollo Future Mobility Group over the last year would be more than acceptable for most companies. Perhaps the market is expecting this decent revenue performance to beat out the industry over the near term, which has kept the P/S propped up. However, if this isn't the case, investors might get caught out paying too much for the stock.

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 Apollo Future Mobility Group's earnings, revenue and cash flow.

How Is Apollo Future Mobility Group's Revenue Growth Trending?

In order to justify its P/S ratio, Apollo Future Mobility Group would need to produce impressive growth in excess of the industry.

If we review the last year of revenue growth, the company posted a terrific increase of 22%. However, this wasn't enough as the latest three year period has seen the company endure a nasty 47% drop in revenue in aggregate. So unfortunately, we have to acknowledge that the company has not done a great job of growing revenues over that time.

Weighing that medium-term revenue trajectory against the broader industry's one-year forecast for expansion of 21% shows it's an unpleasant look.

In light of this, it's alarming that Apollo Future Mobility Group's P/S sits above the majority of other companies. It seems most investors are ignoring the recent poor growth rate and are hoping for a turnaround in the company's business prospects. Only the boldest would assume these prices are sustainable as a continuation of recent revenue trends is likely to weigh heavily on the share price eventually.

The Bottom Line On Apollo Future Mobility Group's P/S

The large bounce in Apollo Future Mobility Group's shares has lifted the company's P/S handsomely. 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.

Our examination of Apollo Future Mobility Group revealed its shrinking revenue over the medium-term isn't resulting in a P/S as low as we expected, given the industry is set to grow. With a revenue decline on investors' minds, the likelihood of a souring sentiment is quite high which could send the P/S back in line with what we'd expect. Should recent medium-term revenue trends persist, it would pose a significant risk to existing shareholders' investments and prospective investors will have a hard time accepting the current value of the stock.

Plus, you should also learn about these 3 warning signs we've spotted with Apollo Future Mobility Group (including 2 which are significant).

If these risks are making you reconsider your opinion on Apollo Future Mobility Group, 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.