Further Upside For MOG Digitech Holdings Limited (HKG:1942) Shares Could Introduce Price Risks After 34% Bounce

Those holding MOG Digitech Holdings Limited (HKG:1942) shares would be relieved that the share price has rebounded 34% in the last thirty days, but it needs to keep going to repair the recent damage it has caused to investor portfolios. Still, the 30-day jump doesn't change the fact that longer term shareholders have seen their stock decimated by the 96% share price drop in the last twelve months.

Even after such a large jump in price, there still wouldn't be many who think MOG Digitech Holdings' price-to-sales (or "P/S") ratio of 0.6x is worth a mention when the median P/S in Hong Kong's Electronic industry is similar at about 0.4x. While this might not raise any eyebrows, if the P/S ratio is not justified investors could be missing out on a potential opportunity or ignoring looming disappointment.

Check out our latest analysis for MOG Digitech Holdings

What Does MOG Digitech Holdings' P/S Mean For Shareholders?

With revenue growth that's exceedingly strong of late, MOG Digitech Holdings has been doing very well. Perhaps the market is expecting future revenue performance to taper off, which has kept the P/S from rising. Those who are bullish on MOG Digitech Holdings will be hoping that this isn't the case, so that they can pick up the stock at a lower valuation.

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 MOG Digitech Holdings' earnings, revenue and cash flow.

Do Revenue Forecasts Match The P/S Ratio?

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

Taking a look back first, we see that the company grew revenue by an impressive 94% last year. Spectacularly, three year revenue growth has ballooned by several orders of magnitude, thanks in part to the last 12 months of revenue growth. Therefore, it's fair to say the revenue growth recently has been superb for the company.

When compared to the industry's one-year growth forecast of 19%, the most recent medium-term revenue trajectory is noticeably more alluring

In light of this, it's curious that MOG Digitech Holdings' P/S sits in line with the majority of other companies. It may be that most investors are not convinced the company can maintain its recent growth rates.

The Bottom Line On MOG Digitech Holdings' P/S

MOG Digitech Holdings' stock has a lot of momentum behind it lately, which has brought its P/S level with the rest of the industry. It's argued the price-to-sales ratio is an inferior measure of value within certain industries, but it can be a powerful business sentiment indicator.

We've established that MOG Digitech Holdings currently trades on a lower than expected P/S since its recent three-year growth is higher than the wider industry forecast. There could be some unobserved threats to revenue preventing the P/S ratio from matching this positive performance. 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.

Don't forget that there may be other risks. For instance, we've identified 3 warning signs for MOG Digitech Holdings (1 is significant) you should be aware of.

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

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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.