When you see that almost half of the companies in the Consumer Retailing industry in Hong Kong have price-to-sales ratios (or "P/S") below 0.6x, YNBY International Limited (HKG:30) looks to be giving off some sell signals with its 2.1x P/S ratio. However, the P/S might be high for a reason and it requires further investigation to determine if it's justified.
SEHK:30 Price to Sales Ratio vs Industry February 23rd 2024
What Does YNBY International's Recent Performance Look Like?
With revenue growth that's exceedingly strong of late, YNBY International has been doing very well. It seems that many are expecting the strong revenue performance to beat most other companies over the coming period, which has increased investors' willingness to pay up for the stock. If not, then existing shareholders might be a little nervous about the viability 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 YNBY International's earnings, revenue and cash flow.
How Is YNBY International's Revenue Growth Trending?
In order to justify its P/S ratio, YNBY International would need to produce impressive growth in excess of the industry.
Taking a look back first, we see that the company's revenues underwent some rampant growth over the last 12 months. Still, revenue has fallen 36% in total from three years ago, which is quite disappointing. So unfortunately, we have to acknowledge that the company has not done a great job of growing revenues over that time.
Comparing that to the industry, which is predicted to deliver 12% growth in the next 12 months, the company's downward momentum based on recent medium-term revenue results is a sobering picture.
In light of this, it's alarming that YNBY International's P/S sits above the majority of other companies. It seems most investors are ignoring the recent poor growth rate and are hoping for a turnaround in the company's business prospects. There's a very good chance existing shareholders are setting themselves up for future disappointment if the P/S falls to levels more in line with the recent negative growth rates.
The Final Word
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 established that YNBY International currently trades on a much higher than expected P/S since its recent revenues have been in decline over the medium-term. When we see revenue heading backwards and underperforming the industry forecasts, we feel the possibility of the share price declining is very real, bringing the P/S back into the realm of reasonability. Unless the recent medium-term conditions improve markedly, investors will have a hard time accepting the share price as fair value.
And what about other risks? Every company has them, and we've spotted 1 warning sign for YNBY International you should know about.
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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當你看到香港消費零售行業將近一半的公司的市銷率(或 “市銷率”)低於0.6倍時,YNBY International Limited(HKG:30)似乎以其2.1倍的市銷率發出了一些賣出信號。但是,市銷率之高可能是有原因的,需要進一步調查以確定其是否合理。