HF Foods Group Inc. (NASDAQ:HFFG) Shares Slammed 26% But Getting In Cheap Might Be Difficult Regardless

HF Foods Group Inc. (NASDAQ:HFFG) shares have had a horrible month, losing 26% after a relatively good period beforehand. The recent drop has obliterated the annual return, with the share price now down 6.0% over that longer period.

Although its price has dipped substantially, it's still not a stretch to say that HF Foods Group's price-to-sales (or "P/S") ratio of 0.1x right now seems quite "middle-of-the-road" compared to the Consumer Retailing industry in the United States, where the median P/S ratio is around 0.4x. 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.

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View our latest analysis for HF Foods Group

How HF Foods Group Has Been Performing

HF Foods Group's revenue growth of late has been pretty similar to most other companies. Perhaps the market is expecting future revenue performance to show no drastic signs of changing, justifying the P/S being at current levels. If you like the company, you'd be hoping this can at least be maintained so that you could pick up some stock while it's not quite in favour.

If you'd like to see what analysts are forecasting going forward, you should check out our free report on HF Foods Group.

What Are Revenue Growth Metrics Telling Us About The P/S?

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

Retrospectively, the last year delivered a decent 4.7% gain to the company's revenues. Pleasingly, revenue has also lifted 32% in aggregate from three years ago, partly thanks to the last 12 months of growth. Therefore, it's fair to say the revenue growth recently has been superb for the company.

Shifting to the future, estimates from the two analysts covering the company suggest revenue should grow by 3.1% over the next year. That's shaping up to be similar to the 4.9% growth forecast for the broader industry.

With this in mind, it makes sense that HF Foods Group's P/S is closely matching its industry peers. It seems most investors are expecting to see average future growth and are only willing to pay a moderate amount for the stock.

What We Can Learn From HF Foods Group's P/S?

With its share price dropping off a cliff, the P/S for HF Foods Group looks to be in line with the rest of the Consumer Retailing industry. Typically, we'd caution against reading too much into price-to-sales ratios when settling on investment decisions, though it can reveal plenty about what other market participants think about the company.

A HF Foods Group's P/S seems about right to us given the knowledge that analysts are forecasting a revenue outlook that is similar to the Consumer Retailing industry. Right now shareholders are comfortable with the P/S as they are quite confident future revenue won't throw up any surprises. Unless these conditions change, they will continue to support the share price at these levels.

You should always think about risks. Case in point, we've spotted 1 warning sign for HF Foods Group you should be aware of.

Of course, profitable companies with a history of great earnings growth are generally safer bets. So you may wish to see this free collection of other companies that have reasonable P/E ratios and have grown earnings strongly.

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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.