Revenues Not Telling The Story For XiDeLang Holdings Ltd (KLSE:XDL) After Shares Rise 33%

XiDeLang Holdings Ltd (KLSE:XDL) shares have had a really impressive month, gaining 33% after a shaky period beforehand. Not all shareholders will be feeling jubilant, since the share price is still down a very disappointing 20% in the last twelve months.

Even after such a large jump in price, it's still not a stretch to say that XiDeLang Holdings' price-to-sales (or "P/S") ratio of 0.1x right now seems quite "middle-of-the-road" compared to the Luxury industry in Malaysia, where the median P/S ratio is around 0.6x. 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.

View our latest analysis for XiDeLang Holdings

How XiDeLang Holdings Has Been Performing

Revenue has risen firmly for XiDeLang Holdings recently, which is pleasing to see. Perhaps the market is expecting future revenue performance to only keep up with the broader industry, which has keeping the P/S in line with expectations. If that doesn't eventuate, then existing shareholders probably aren't too pessimistic about the future direction 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 XiDeLang Holdings' earnings, revenue and cash flow.

Is There Some Revenue Growth Forecasted For XiDeLang Holdings?

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

If we review the last year of revenue growth, the company posted a terrific increase of 19%. As a result, it also grew revenue by 23% in total over the last three years. Therefore, it's fair to say the revenue growth recently has been respectable for the company.

Comparing the recent medium-term revenue trends against the industry's one-year growth forecast of 34% shows it's noticeably less attractive.

In light of this, it's curious that XiDeLang Holdings' P/S sits in line with the majority of other companies. Apparently many investors in the company are less bearish than recent times would indicate and aren't willing to let go of their stock right now. Maintaining these prices will be difficult to achieve as a continuation of recent revenue trends is likely to weigh down the shares eventually.

What Does XiDeLang Holdings' P/S Mean For Investors?

XiDeLang 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.

Our examination of XiDeLang Holdings revealed its poor three-year revenue trends aren't resulting in a lower P/S as per our expectations, given they look worse than current industry outlook. Right now we are uncomfortable with the P/S as this revenue performance isn't likely to support a more positive sentiment for long. Unless there is a significant improvement in the company's medium-term performance, it will be difficult to prevent the P/S ratio from declining to a more reasonable level.

Plus, you should also learn about these 3 warning signs we've spotted with XiDeLang Holdings.

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.