Positive Sentiment Still Eludes Vision Values Holdings Limited (HKG:862) Following 35% Share Price Slump

Vision Values Holdings Limited (HKG:862) shareholders that were waiting for something to happen have been dealt a blow with a 35% share price drop in the last month. For any long-term shareholders, the last month ends a year to forget by locking in a 80% share price decline.

Following the heavy fall in price, considering around half the companies operating in Hong Kong's IT industry have price-to-sales ratios (or "P/S") above 1x, you may consider Vision Values Holdings as an solid investment opportunity with its 0.2x P/S ratio. However, the P/S might be low for a reason and it requires further investigation to determine if it's justified.

See our latest analysis for Vision Values Holdings

How Has Vision Values Holdings Performed Recently?

With revenue growth that's exceedingly strong of late, Vision Values Holdings has been doing very well. Perhaps the market is expecting future revenue performance to dwindle, which has kept the P/S suppressed. 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 out of 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 Vision Values Holdings' earnings, revenue and cash flow.

How Is Vision Values Holdings' Revenue Growth Trending?

There's an inherent assumption that a company should underperform the industry for P/S ratios like Vision Values Holdings' to be considered reasonable.

Taking a look back first, we see that the company grew revenue by an impressive 215% last year. 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.

This is in contrast to the rest of the industry, which is expected to grow by 10% over the next year, materially lower than the company's recent medium-term annualised growth rates.

In light of this, it's peculiar that Vision Values Holdings' P/S sits below the majority of other companies. Apparently some shareholders believe the recent performance has exceeded its limits and have been accepting significantly lower selling prices.

The Key Takeaway

Vision Values Holdings' P/S has taken a dip along with its share price. 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.

Our examination of Vision Values Holdings revealed its three-year revenue trends aren't boosting its P/S anywhere near as much as we would have predicted, given they look better than current industry expectations. When we see strong revenue with faster-than-industry growth, we assume there are some significant underlying risks to the company's ability to make money which is applying downwards pressure on the P/S ratio. It appears many are indeed anticipating revenue instability, because the persistence of these recent medium-term conditions would normally provide a boost to the share price.

Before you take the next step, you should know about the 3 warning signs for Vision Values Holdings (2 are significant!) that we have uncovered.

Of course, profitable companies with a history of great earnings growth are generally safer bets. So you may wish to see this free collection of other companies that have reasonable P/E ratios and have grown earnings strongly.

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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.