Pop Mart International Group Limited (HKG:9992) Looks Just Right With A 35% Price Jump

Despite an already strong run, Pop Mart International Group Limited (HKG:9992) shares have been powering on, with a gain of 35% in the last thirty days. This latest share price bounce rounds out a remarkable 477% gain over the last twelve months.

Following the firm bounce in price, given around half the companies in Hong Kong's Specialty Retail industry have price-to-sales ratios (or "P/S") below 0.4x, you may consider Pop Mart International Group as a stock to avoid entirely with its 17x P/S ratio. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's so lofty.

View our latest analysis for Pop Mart International Group

What Does Pop Mart International Group's Recent Performance Look Like?

With revenue growth that's superior to most other companies of late, Pop Mart International Group has been doing relatively well. The P/S is probably high because investors think this strong revenue performance will continue. However, if this isn't the case, investors might get caught out paying too much for the stock.

Keen to find out how analysts think Pop Mart International Group's future stacks up against the industry? In that case, our free report is a great place to start.

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

The only time you'd be truly comfortable seeing a P/S as steep as Pop Mart International Group's is when the company's growth is on track to outshine the industry decidedly.

If we review the last year of revenue growth, the company posted a terrific increase of 59%. The strong recent performance means it was also able to grow revenue by 132% in total over the last three years. So we can start by confirming that the company has done a great job of growing revenue over that time.

Shifting to the future, estimates from the analysts covering the company suggest revenue should grow by 75% over the next year. With the industry only predicted to deliver 34%, the company is positioned for a stronger revenue result.

With this information, we can see why Pop Mart International Group is trading at such a high P/S compared to the industry. It seems most investors are expecting this strong future growth and are willing to pay more for the stock.

The Bottom Line On Pop Mart International Group's P/S

Pop Mart International Group's P/S has grown nicely over the last month thanks to a handy boost in the share price. 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.

We've established that Pop Mart International Group maintains its high P/S on the strength of its forecasted revenue growth being higher than the the rest of the Specialty Retail industry, as expected. At this stage investors feel the potential for a deterioration in revenues is quite remote, justifying the elevated P/S ratio. Unless these conditions change, they will continue to provide strong support to the share price.

A lot of potential risks can sit within a company's balance sheet. Our free balance sheet analysis for Pop Mart International Group with six simple checks will allow you to discover any risks that could be an issue.

If companies with solid past earnings growth is up your alley, you may wish to see this free collection of other companies with strong earnings growth and low P/E ratios.

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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.