The Market Lifts Ta Yang Group Holdings Limited (HKG:1991) Shares 47% But It Can Do More

Ta Yang Group Holdings Limited (HKG:1991) shareholders are no doubt pleased to see that the share price has bounced 47% in the last month, although it is still struggling to make up recently lost ground. While recent buyers may be laughing, long-term holders might not be as pleased since the recent gain only brings the stock back to where it started a year ago.

Even after such a large jump in price, you could still be forgiven for feeling indifferent about Ta Yang Group Holdings' P/S ratio of 0.1x, since the median price-to-sales (or "P/S") ratio for the Electronic industry in Hong Kong is also close to 0.3x. 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.

Our free stock report includes 3 warning signs investors should be aware of before investing in Ta Yang Group Holdings. Read for free now.

Check out our latest analysis for Ta Yang Group Holdings

What Does Ta Yang Group Holdings' Recent Performance Look Like?

As an illustration, revenue has deteriorated at Ta Yang Group Holdings over the last year, which is not ideal at all. Perhaps investors believe the recent revenue performance is enough to keep in line with the industry, which is keeping the P/S from dropping off. If not, then existing shareholders may be a little nervous about the viability of the share price.

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 Ta Yang Group Holdings' earnings, revenue and cash flow.

How Is Ta Yang Group Holdings' Revenue Growth Trending?

In order to justify its P/S ratio, Ta Yang Group Holdings would need to produce growth that's similar to the industry.

Taking a look back first, the company's revenue growth last year wasn't something to get excited about as it posted a disappointing decline of 20%. Even so, admirably revenue has lifted 168% in aggregate from three years ago, notwithstanding the last 12 months. So we can start by confirming that the company has generally done a very good job of growing revenue over that time, even though it had some hiccups along the way.

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 Ta Yang Group Holdings is trading at a fairly similar P/S compared to the industry. It may be that most investors are not convinced the company can maintain its recent growth rates.

What We Can Learn From Ta Yang Group Holdings' P/S?

Ta Yang Group 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 We'd say the price-to-sales ratio's power isn't primarily as a valuation instrument but rather to gauge current investor sentiment and future expectations.

To our surprise, Ta Yang Group Holdings revealed its three-year revenue trends aren't contributing to its P/S as much as we would have predicted, given they look better than current industry expectations. There could be some unobserved threats to revenue preventing the P/S ratio from matching this positive performance. At least the risk of a price drop looks to be subdued if recent medium-term revenue trends continue, but investors seem to think future revenue could see some volatility.

You need to take note of risks, for example - Ta Yang Group Holdings has 3 warning signs (and 1 which is significant) we think you should know about.

It's important to make sure you look for a great company, not just the first idea you come across. So if growing profitability aligns with your idea of a great company, take a peek at this free list of interesting companies with strong recent earnings growth (and a low P/E).

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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.