Further Upside For Huize Holding Limited (NASDAQ:HUIZ) Shares Could Introduce Price Risks After 30% Bounce

Huize Holding Limited (NASDAQ:HUIZ) shareholders are no doubt pleased to see that the share price has bounced 30% in the last month, although it is still struggling to make up recently lost ground. Not all shareholders will be feeling jubilant, since the share price is still down a very disappointing 36% in the last twelve months.

In spite of the firm bounce in price, it would still be understandable if you think Huize Holding is a stock with good investment prospects with a price-to-sales ratios (or "P/S") of 0.1x, considering almost half the companies in the United States' Insurance industry have P/S ratios above 1.1x. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the reduced P/S.

Our free stock report includes 1 warning sign investors should be aware of before investing in Huize Holding. Read for free now.

See our latest analysis for Huize Holding

How Huize Holding Has Been Performing

Recent times haven't been great for Huize Holding as its revenue has been rising slower than most other companies. It seems that many are expecting the uninspiring revenue performance to persist, which has repressed the growth of the P/S ratio. If this is the case, then existing shareholders will probably struggle to get excited about the future direction of the share price.

Want the full picture on analyst estimates for the company? Then our free report on Huize Holding will help you uncover what's on the horizon.

Is There Any Revenue Growth Forecasted For Huize Holding?

There's an inherent assumption that a company should underperform the industry for P/S ratios like Huize Holding's to be considered reasonable.

Taking a look back first, we see that the company managed to grow revenues by a handy 4.5% last year. However, this wasn't enough as the latest three year period has seen an unpleasant 44% 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.

Looking ahead now, revenue is anticipated to climb by 7.4% per annum during the coming three years according to the dual analysts following the company. With the industry predicted to deliver 7.1% growth each year, the company is positioned for a comparable revenue result.

With this in consideration, we find it intriguing that Huize Holding's P/S is lagging behind its industry peers. It may be that most investors are not convinced the company can achieve future growth expectations.

What Does Huize Holding's P/S Mean For Investors?

Huize Holding's 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.

We've seen that Huize Holding currently trades on a lower than expected P/S since its forecast growth is in line with the wider industry. Despite average revenue growth estimates, there could be some unobserved threats keeping the P/S low. At least the risk of a price drop looks to be subdued, but investors seem to think future revenue could see some volatility.

We don't want to rain on the parade too much, but we did also find 1 warning sign for Huize Holding that you need to be mindful 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.