Black Sesame International Holding Limited's (HKG:2533) Share Price Matching Investor Opinion

Explore Black Sesame International Holding's Fair Values from the Community and select yours

When close to half the companies in the Semiconductor industry in Hong Kong have price-to-sales ratios (or "P/S") below 1.6x, you may consider Black Sesame International Holding Limited (HKG:2533) as a stock to avoid entirely with its 22.6x 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.

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View our latest analysis for Black Sesame International Holding

How Black Sesame International Holding Has Been Performing

Black Sesame International Holding certainly has been doing a good job lately as it's been growing revenue more than most other companies. It seems that many are expecting the strong revenue performance to persist, which has raised the P/S. You'd really hope so, otherwise you're paying a pretty hefty price for no particular reason.

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

How Is Black Sesame International Holding's Revenue Growth Trending?

The only time you'd be truly comfortable seeing a P/S as steep as Black Sesame International Holding'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 52%. The latest three year period has also seen an incredible overall rise in revenue, aided by its incredible short-term performance. Accordingly, shareholders would have been over the moon with those medium-term rates of revenue growth.

Shifting to the future, estimates from the six analysts covering the company suggest revenue should grow by 63% per year over the next three years. Meanwhile, the rest of the industry is forecast to only expand by 22% per year, which is noticeably less attractive.

With this information, we can see why Black Sesame International Holding is trading at such a high P/S compared to the industry. Apparently shareholders aren't keen to offload something that is potentially eyeing a more prosperous future.

What Does Black Sesame International Holding's 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.

We've established that Black Sesame International Holding maintains its high P/S on the strength of its forecasted revenue growth being higher than the the rest of the Semiconductor industry, as expected. At this stage investors feel the potential for a deterioration in revenues is quite remote, justifying the elevated P/S ratio. It's hard to see the share price falling strongly in the near future under these circumstances.

We don't want to rain on the parade too much, but we did also find 2 warning signs for Black Sesame International Holding that you need to be mindful of.

If strong companies turning a profit tickle your fancy, then you'll want to check out this free list of interesting companies that trade on a low P/E (but have proven they can grow earnings).

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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.