Even With A 43% Surge, Cautious Investors Are Not Rewarding PINE Technology Holdings Limited's (HKG:1079) Performance Completely

PINE Technology Holdings Limited (HKG:1079) shares have had a really impressive month, gaining 43% after a shaky period beforehand. The last 30 days bring the annual gain to a very sharp 50%.

In spite of the firm bounce in price, you could still be forgiven for feeling indifferent about PINE Technology Holdings' P/S ratio of 0.3x, since the median price-to-sales (or "P/S") ratio for the Tech industry in Hong Kong is also close to 0.5x. Although, it's not wise to simply ignore the P/S without explanation as investors may be disregarding a distinct opportunity or a costly mistake.

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View our latest analysis for PINE Technology Holdings

What Does PINE Technology Holdings' Recent Performance Look Like?

PINE Technology Holdings certainly has been doing a great job lately as it's been growing its revenue at a really rapid pace. The P/S is probably moderate because investors think this strong revenue growth might not be enough to outperform the broader industry in the near future. 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 not quite in favour.

Want the full picture on earnings, revenue and cash flow for the company? Then our free report on PINE Technology Holdings will help you shine a light on its historical performance.

How Is PINE Technology Holdings' Revenue Growth Trending?

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

Retrospectively, the last year delivered an exceptional 51% gain to the company's top line. The latest three year period has also seen an excellent 295% overall rise in revenue, aided by its short-term performance. Therefore, it's fair to say the revenue growth recently has been superb for the company.

Comparing that to the industry, which is only predicted to deliver 18% growth in the next 12 months, the company's momentum is stronger based on recent medium-term annualised revenue results.

With this information, we find it interesting that PINE Technology Holdings is trading at a fairly similar P/S compared to the industry. Apparently some shareholders believe the recent performance is at its limits and have been accepting lower selling prices.

The Bottom Line On PINE Technology Holdings' P/S

PINE Technology Holdings appears to be back in favour with a solid price jump bringing its P/S back in line with other companies in the industry 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.

We've established that PINE Technology Holdings currently trades on a lower than expected P/S since its recent three-year growth is higher than the wider industry forecast. When we see strong revenue with faster-than-industry growth, we can only assume potential risks are what might be placing pressure on the P/S ratio. While recent revenue trends over the past medium-term suggest that the risk of a price decline is low, investors appear to see the likelihood of revenue fluctuations in the future.

It's always necessary to consider the ever-present spectre of investment risk. We've identified 2 warning signs with PINE Technology Holdings, and understanding these should be part of your investment process.

If you're unsure about the strength of PINE Technology Holdings' business, why not explore our interactive list of stocks with solid business fundamentals for some other companies you may have missed.

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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.