China International Holdings Limited (SGX:BEH) shareholders would be excited to see that the share price has had a great month, posting a 29% gain and recovering from prior weakness.    Not all shareholders will be feeling jubilant, since the share price is still down a very disappointing 26% in the last twelve months.  

In spite of the firm bounce in price, China International Holdings' price-to-sales (or "P/S") ratio of 0.3x might still make it look like a buy right now compared to the Water Utilities industry in Singapore, where around half of the companies have P/S ratios above 1.8x and even P/S above 4x are quite common.   Although, it's not wise to just take the P/S at face value as there may be an explanation why it's limited.  

View our latest analysis for China International Holdings

SGX:BEH Price to Sales Ratio vs Industry January 3rd 2024

How Has China International Holdings Performed Recently?

As an illustration, revenue has deteriorated at China International 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 China International Holdings will help you shine a light on its historical performance.  

How Is China International Holdings' Revenue Growth Trending?  

The only time you'd be truly comfortable seeing a P/S as low as China International Holdings' is when the company's growth is on track to lag 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 4.8%.   As a result, revenue from three years ago have also fallen 20% overall.  So unfortunately, we have to acknowledge that the company has not done a great job of growing revenue over that time.  

Weighing that medium-term revenue trajectory against the broader industry's one-year forecast for expansion of 11% shows it's an unpleasant look.

In light of this, it's understandable that China International Holdings' P/S would sit below the majority of other companies.  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.  Even just maintaining these prices could be difficult to achieve as recent revenue trends are already weighing down the shares.  

What We Can Learn From China International Holdings' P/S?

China International Holdings' stock price has surged recently, but its but its P/S still remains modest.      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.

Our examination of China International Holdings confirms that the company's shrinking revenue over the past medium-term is a key factor in its low price-to-sales ratio, given the industry is projected 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.  Unless the recent medium-term conditions improve, they will continue to form a barrier for the share price around these levels.    

We don't want to rain on the parade too much, but we did also find 3 warning signs for China International Holdings (2 shouldn't be ignored!) that you need to be mindful of.  

If these risks are making you reconsider your opinion on China International Holdings, explore our interactive list of high quality stocks to get an idea of what else is out there.

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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.