Investors Still Aren't Entirely Convinced By Ever Harvest Group Holdings Limited's (HKG:1549) Revenues Despite 29% Price Jump

Ever Harvest Group Holdings Limited (HKG:1549) shareholders have had their patience rewarded with a 29% share price jump in the last month. Looking back a bit further, it's encouraging to see the stock is up 29% in the last year.

In spite of the firm bounce in price, given about half the companies operating in Hong Kong's Shipping industry have price-to-sales ratios (or "P/S") above 1x, you may still consider Ever Harvest Group Holdings as an attractive investment with its 0.4x 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 limited.

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Check out our latest analysis for Ever Harvest Group Holdings

How Has Ever Harvest Group Holdings Performed Recently?

Ever Harvest Group Holdings has been doing a decent job lately as it's been growing revenue at a reasonable pace. It might be that many expect the respectable revenue performance to degrade, which has repressed the P/S. Those who are bullish on Ever Harvest Group Holdings will be hoping that this isn't the case, so that they can pick up the stock at a lower valuation.

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

Do Revenue Forecasts Match The Low P/S Ratio?

Ever Harvest Group Holdings' P/S ratio would be typical for a company that's only expected to deliver limited growth, and importantly, perform worse than the industry.

Retrospectively, the last year delivered a decent 2.8% gain to the company's revenues. However, this wasn't enough as the latest three year period has seen an unpleasant 18% overall drop in revenue. So unfortunately, we have to acknowledge that the company has not done a great job of growing revenue over that time.

Comparing that to the industry, which is predicted to shrink 9.5% in the next 12 months, the company's downward momentum is still superior based on recent medium-term annualised revenue results.

In light of this, the fact Ever Harvest Group Holdings' P/S sits below the majority of other companies is peculiar but certainly not shocking. There's no guarantee the P/S has found a floor yet with recent revenue going backwards, despite the industry heading down even harder. There is still potential for the P/S to fall to even lower levels if the company doesn't improve its top-line growth, which would be difficult to do with the current industry outlook.

What Does Ever Harvest Group Holdings' P/S Mean For Investors?

Ever Harvest Group Holdings' stock price has surged recently, but its but its P/S still remains modest. 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.

Our examination of Ever Harvest Group Holdings revealed its narrower three-year contraction in revenue isn't contributing to its P/S anywhere near as much as we would have predicted, given the industry is set to shrink even more. There could be some major unobserved threats to revenue preventing the P/S ratio from matching this comparatively more attractive revenue performance. The most obvious risk is that its revenue trajectory may not keep outperforming under these tough industry conditions. It appears many are indeed anticipating revenue instability, because this relative performance should normally provide a boost to the share price.

It's always necessary to consider the ever-present spectre of investment risk. We've identified 3 warning signs with Ever Harvest Group Holdings (at least 1 which makes us a bit uncomfortable), and understanding these should be part of your investment process.

If companies with solid past earnings growth is up your alley, you may wish to see this free collection of other companies with strong earnings growth and low P/E ratios.

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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.