Flydoo Technology Holding Limited (HKG:8069) shares have had a really impressive month, gaining 25% after a shaky period beforehand. Not all shareholders will be feeling jubilant, since the share price is still down a very disappointing 49% in the last twelve months.
Even after such a large jump in price, considering around half the companies operating in Hong Kong's Hospitality industry have price-to-sales ratios (or "P/S") above 1x, you may still consider Flydoo Technology Holding as an solid investment opportunity with its 0.2x P/S ratio. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the reduced P/S.
See our latest analysis for Flydoo Technology Holding
What Does Flydoo Technology Holding's Recent Performance Look Like?
Recent times have been quite advantageous for Flydoo Technology Holding as its revenue has been rising very briskly. Perhaps the market is expecting future revenue performance to dwindle, which has kept the P/S suppressed. Those who are bullish on Flydoo Technology Holding will be hoping that this isn't the case, so that they can pick up the stock at a lower valuation.
How Is Flydoo Technology Holding's Revenue Growth Trending?
Flydoo Technology Holding's P/S ratio would be typical for a company that's only expected to deliver limited growth, and importantly, perform worse than the industry.
Retrospectively, the last year delivered an explosive gain to the company's top line. The latest three year period has also seen an excellent 154% overall rise in revenue, aided by its incredible short-term performance. So we can start by confirming that the company has done a great job of growing revenue over that time.
Comparing the recent medium-term revenue trends against the industry's one-year growth forecast of 41% shows it's noticeably less attractive.
With this in consideration, it's easy to understand why Flydoo Technology Holding's P/S falls short of the mark set by its industry peers. Apparently many shareholders weren't comfortable holding on to something they believe will continue to trail the wider industry.
What Does Flydoo Technology Holding's P/S Mean For Investors?
Flydoo Technology 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.
In line with expectations, Flydoo Technology Holding maintains its low P/S on the weakness of its recent three-year growth being lower than the wider industry forecast. 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 experience a reversal of fortunes anytime soon.
You should always think about risks. Case in point, we've spotted 4 warning signs for Flydoo Technology Holding you should be aware of, and 1 of them makes us a bit uncomfortable.
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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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.
