Not Many Are Piling Into Huize Holding Limited (NASDAQ:HUIZ) Stock Yet As It Plummets 27%

Huize Holding Limited (NASDAQ:HUIZ) shareholders won't be pleased to see that the share price has had a very rough month, dropping 27% and undoing the prior period's positive performance. The drop over the last 30 days has capped off a tough year for shareholders, with the share price down 15% in that time.

Following the heavy fall in price, given about half the companies operating in the United States' Insurance industry have price-to-sales ratios (or "P/S") above 1.2x, you may consider Huize Holding as an attractive investment with its 0.2x 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.

Check out our latest analysis for Huize Holding

How Has Huize Holding Performed Recently?

With revenue growth that's inferior to most other companies of late, Huize Holding has been relatively sluggish. It seems that many are expecting the uninspiring revenue performance to persist, which has repressed the growth of the P/S ratio. If you still like the company, you'd be hoping revenue doesn't get any worse and that you could pick up some stock while it's out of favour.

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.

How Is Huize Holding's Revenue Growth Trending?

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

If we review the last year of revenue growth, the company posted a worthy increase of 4.5%. Ultimately though, it couldn't turn around the poor performance of the prior period, with revenue shrinking 44% in total over the last three years. So unfortunately, we have to acknowledge that the company has not done a great job of growing revenue over that time.

Turning to the outlook, the next three years should generate growth of 7.4% each year as estimated by the three analysts watching the company. That's shaping up to be similar to the 7.3% per year growth forecast for the broader industry.

In light of this, it's peculiar that Huize Holding's P/S sits below the majority of other companies. Apparently some shareholders are doubtful of the forecasts and have been accepting lower selling prices.

What We Can Learn From Huize Holding's P/S?

Huize Holding's recently weak share price has pulled its P/S back below other Insurance companies. Generally, our preference is to limit the use of the price-to-sales ratio to establishing what the market thinks about the overall health of a company.

Our examination of Huize Holding's revealed that its P/S remains low despite analyst forecasts of revenue growth matching the wider industry. The low P/S could be an indication that the revenue growth estimates are being questioned by the market. It appears some are indeed anticipating revenue instability, because these conditions should normally provide more support to the share price.

You always need to take note of risks, for example - Huize Holding has 1 warning sign we think 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.