Unfortunately for some shareholders, the BExcellent Group Holdings Limited (HKG:1775) share price has dived 29% in the last thirty days, prolonging recent pain.    The recent drop completes a disastrous twelve months for shareholders, who are sitting on a 55% loss during that time.  

Since its price has dipped substantially, BExcellent Group Holdings may be sending bullish signals at the moment with its price-to-sales (or "P/S") ratio of 0.7x, since almost half of all companies in the Consumer Services industry in Hong Kong have P/S ratios greater than 1.2x and even P/S higher than 4x are not unusual.   Although, it's not wise to just take the P/S at face value as there may be an explanation why it's limited.  

See our latest analysis for BExcellent Group Holdings

SEHK:1775 Price to Sales Ratio vs Industry October 30th 2023

What Does BExcellent Group Holdings' P/S Mean For Shareholders?

As an illustration, revenue has deteriorated at BExcellent Group Holdings over the last year, which is not ideal at all.   It might be that many expect the disappointing revenue performance to continue or accelerate, which has repressed the P/S.  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 out of favour.    

Want the full picture on earnings, revenue and cash flow for the company? Then our free report on BExcellent Group Holdings will help you shine a light on its historical performance.  

Is There Any Revenue Growth Forecasted For BExcellent Group Holdings?  

In order to justify its P/S ratio, BExcellent Group Holdings would need to produce sluggish growth that's trailing the industry.  

Taking a look back first, the company's revenue growth last year wasn't something to get excited about as it posted a disappointing decline of 1.8%.   The last three years don't look nice either as the company has shrunk revenue by 51% in aggregate.  Accordingly, shareholders would have felt downbeat about the medium-term rates of revenue growth.  

Comparing that to the industry, which is predicted to deliver 21% growth in the next 12 months, the company's downward momentum based on recent medium-term revenue results is a sobering picture.

With this in mind, we understand why BExcellent Group Holdings' P/S is lower than most of its industry peers.  However, we think shrinking revenues are unlikely to lead to a stable P/S over the longer term, which could set up shareholders for future disappointment.  There's potential for the P/S to fall to even lower levels if the company doesn't improve its top-line growth.  

The Final Word

BExcellent Group Holdings' P/S has taken a dip along with its share price.      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.

As we suspected, our examination of BExcellent Group Holdings revealed its shrinking revenue over the medium-term is contributing to its low P/S, given the industry is set to grow.  At this stage investors feel the potential for an improvement in revenue isn't great enough to justify a higher P/S ratio.  If recent medium-term revenue trends continue, it's hard to see the share price moving strongly in either direction in the near future under these circumstances.    

We don't want to rain on the parade too much, but we did also find 2 warning signs for BExcellent Group Holdings (1 is a bit concerning!) that you need to be mindful of.  

If strong companies turning a profit tickle your fancy, then you'll want to check out this free list of interesting companies that trade on a low P/E (but have proven they can grow earnings).

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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.