share_log

Alpha Group's (SZSE:002292) 33% Price Boost Is Out Of Tune With Revenues

alpha group(SZSE:002292)の33%の価格上昇は収益と調和していません

Simply Wall St ·  12/07 06:57

Alpha Group (SZSE:002292) shares have continued their recent momentum with a 33% gain in the last month alone. While recent buyers may be laughing, long-term holders might not be as pleased since the recent gain only brings the stock back to where it started a year ago.

After such a large jump in price, given close to half the companies operating in China's Leisure industry have price-to-sales ratios (or "P/S") below 3.4x, you may consider Alpha Group as a stock to potentially avoid with its 5.3x 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 as high as it is.

big
SZSE:002292 Price to Sales Ratio vs Industry December 6th 2024

How Has Alpha Group Performed Recently?

Recent times haven't been great for Alpha Group as its revenue has been rising slower than most other companies. Perhaps the market is expecting future revenue performance to undergo a reversal of fortunes, which has elevated the P/S ratio. You'd really hope so, otherwise you're paying a pretty hefty price for no particular reason.

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

How Is Alpha Group's Revenue Growth Trending?

The only time you'd be truly comfortable seeing a P/S as high as Alpha Group's is when the company's growth is on track to outshine the industry.

If we review the last year of revenue growth, the company posted a worthy increase of 2.6%. Still, revenue has barely risen at all in aggregate from three years ago, which is not ideal. Accordingly, shareholders probably wouldn't have been overly satisfied with the unstable medium-term growth rates.

Shifting to the future, estimates from the one analyst covering the company suggest revenue should grow by 18% over the next year. With the industry predicted to deliver 22% growth, the company is positioned for a weaker revenue result.

With this in consideration, we believe it doesn't make sense that Alpha Group's P/S is outpacing its industry peers. Apparently many investors in the company are way more bullish than analysts indicate and aren't willing to let go of their stock at any price. There's a good chance these shareholders are setting themselves up for future disappointment if the P/S falls to levels more in line with the growth outlook.

What Does Alpha Group's P/S Mean For Investors?

Alpha Group's P/S is on the rise since its shares have risen strongly. 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.

We've concluded that Alpha Group currently trades on a much higher than expected P/S since its forecast growth is lower than the wider industry. When we see a weak revenue outlook, we suspect the share price faces a much greater risk of declining, bringing back down the P/S figures. Unless these conditions improve markedly, it's very challenging to accept these prices as being reasonable.

Many other vital risk factors can be found on the company's balance sheet. You can assess many of the main risks through our free balance sheet analysis for Alpha Group with six simple checks.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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.

これらの内容は、情報提供及び投資家教育のためのものであり、いかなる個別株や投資方法を推奨するものではありません。 更に詳しい情報
    コメントする