Optimistic Investors Push Beisen Holding Limited (HKG:9669) Shares Up 54% But Growth Is Lacking

The Beisen Holding Limited (HKG:9669) share price has done very well over the last month, posting an excellent gain of 54%. Looking back a bit further, it's encouraging to see the stock is up 83% in the last year.

After such a large jump in price, when almost half of the companies in Hong Kong's Software industry have price-to-sales ratios (or "P/S") below 1.9x, you may consider Beisen Holding as a stock not worth researching with its 6.1x 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.

Trump has pledged to "unleash" American oil and gas and these 15 US stocks have developments that are poised to benefit.

Check out our latest analysis for Beisen Holding

How Beisen Holding Has Been Performing

Beisen Holding could be doing better as it's been growing revenue less than most other companies lately. It might be that many expect the uninspiring revenue performance to recover significantly, which has kept the P/S ratio from collapsing. You'd really hope so, otherwise you're paying a pretty hefty price for no particular reason.

If you'd like to see what analysts are forecasting going forward, you should check out our free report on Beisen Holding.

How Is Beisen Holding's Revenue Growth Trending?

There's an inherent assumption that a company should far outperform the industry for P/S ratios like Beisen Holding's to be considered reasonable.

Taking a look back first, we see that the company managed to grow revenues by a handy 11% last year. The latest three year period has also seen an excellent 39% overall rise in revenue, aided somewhat by its short-term performance. So we can start by confirming that the company has done a great job of growing revenues over that time.

Looking ahead now, revenue is anticipated to climb by 16% during the coming year according to the four analysts following the company. Meanwhile, the rest of the industry is forecast to expand by 28%, which is noticeably more attractive.

In light of this, it's alarming that Beisen Holding's P/S sits above the majority of other companies. It seems most investors are hoping for a turnaround in the company's business prospects, but the analyst cohort is not so confident this will happen. Only the boldest would assume these prices are sustainable as this level of revenue growth is likely to weigh heavily on the share price eventually.

What We Can Learn From Beisen Holding's P/S?

Shares in Beisen Holding have seen a strong upwards swing lately, which has really helped boost its P/S figure. While the price-to-sales ratio shouldn't be the defining factor in whether you buy a stock or not, it's quite a capable barometer of revenue expectations.

It comes as a surprise to see Beisen Holding trade at such a high P/S given the revenue forecasts look less than stellar. The weakness in the company's revenue estimate doesn't bode well for the elevated P/S, which could take a fall if the revenue sentiment doesn't improve. Unless these conditions improve markedly, it's very challenging to accept these prices as being reasonable.

Many other vital risk factors can be found on the company's balance sheet. Our free balance sheet analysis for Beisen Holding with six simple checks will allow you to discover any risks that could be an issue.

If these risks are making you reconsider your opinion on Beisen Holding, explore our interactive list of high quality stocks to get an idea of what else is out there.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.