Hainan Meilan International Airport Company Limited (HKG:357) Screens Well But There Might Be A Catch

There wouldn't be many who think Hainan Meilan International Airport Company Limited's (HKG:357) price-to-sales (or "P/S") ratio of 1.7x is worth a mention when the median P/S for the Infrastructure industry in Hong Kong is similar at about 1.5x. 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.

See our latest analysis for Hainan Meilan International Airport

How Hainan Meilan International Airport Has Been Performing

With revenue growth that's superior to most other companies of late, Hainan Meilan International Airport has been doing relatively well. One possibility is that the P/S ratio is moderate because investors think this strong revenue performance might be about to tail off. 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.

Keen to find out how analysts think Hainan Meilan International Airport's future stacks up against the industry? In that case, our free report is a great place to start.

How Is Hainan Meilan International Airport's Revenue Growth Trending?

In order to justify its P/S ratio, Hainan Meilan International Airport would need to produce growth that's similar to the industry.

Taking a look back first, we see that the company grew revenue by an impressive 37% last year. Pleasingly, revenue has also lifted 31% in aggregate from three years ago, thanks to the last 12 months of growth. Accordingly, shareholders would have definitely welcomed those medium-term rates of revenue growth.

Looking ahead now, revenue is anticipated to climb by 16% during the coming year according to the three analysts following the company. Meanwhile, the rest of the industry is forecast to only expand by 1.0%, which is noticeably less attractive.

In light of this, it's curious that Hainan Meilan International Airport's P/S sits in line with the majority of other companies. Apparently some shareholders are skeptical of the forecasts and have been accepting lower selling prices.

What Does Hainan Meilan International Airport's P/S Mean For Investors?

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.

Despite enticing revenue growth figures that outpace the industry, Hainan Meilan International Airport's P/S isn't quite what we'd expect. When we see a strong revenue outlook, with growth outpacing the industry, we can only assume potential uncertainty around these figures are what might be placing slight pressure on the P/S ratio. This uncertainty seems to be reflected in the share price which, while stable, could be higher given the revenue forecasts.

Don't forget that there may be other risks. For instance, we've identified 1 warning sign for Hainan Meilan International Airport that you should be aware of.

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.