The Miko International Holdings Limited (HKG:1247) share price has softened a substantial 27% over the previous 30 days, handing back much of the gains the stock has made lately.    Still, a bad month hasn't completely ruined the past year with the stock gaining 89%, which is great even in a bull market.  

Even after such a large drop in price, you could still be forgiven for feeling indifferent about Miko International Holdings' P/S ratio of 1x, since the median price-to-sales (or "P/S") ratio for the Luxury industry in Hong Kong is also close to 0.6x.  Although, it's not wise to simply ignore the P/S without explanation as investors may be disregarding a distinct opportunity or a costly mistake.    

SEHK:1247 Price to Sales Ratio vs Industry February 4th 2024

What Does Miko International Holdings' P/S Mean For Shareholders?

Miko International Holdings has been doing a good job lately as it's been growing revenue at a solid pace.   It might be that many expect the respectable revenue performance to wane, which has kept the P/S from rising.  If that doesn't eventuate, then existing shareholders probably aren't too pessimistic about the future direction of the share price.    

Although there are no analyst estimates available for Miko International Holdings, take a look at this free data-rich visualisation to see how the company stacks up on earnings, revenue and cash flow.  

Is There Some Revenue Growth Forecasted For Miko International Holdings?  

In order to justify its P/S ratio, Miko International Holdings would need to produce growth that's similar to the industry.  

Taking a look back first, we see that the company grew revenue by an impressive 27% last year.    Although, its longer-term performance hasn't been as strong with three-year revenue growth being relatively non-existent overall.  Accordingly, shareholders probably wouldn't have been overly satisfied with the unstable medium-term growth rates.  

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

With this information, we find it interesting that Miko International Holdings is trading at a fairly similar P/S compared to the industry.  It seems most investors are ignoring the fairly limited recent growth rates and are willing to pay up for exposure to the stock.  They may be setting themselves up for future disappointment if the P/S falls to levels more in line with recent growth rates.  

The Bottom Line On Miko International Holdings' P/S

Following Miko International Holdings' share price tumble, its P/S is just clinging on to the industry median P/S.      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.

Our examination of Miko International Holdings revealed its poor three-year revenue trends aren't resulting in a lower P/S as per our expectations, given they look worse than current industry outlook.  When we see weak revenue with slower than industry growth, we suspect the share price is at risk of declining, bringing the P/S back in line with expectations.  Unless the recent medium-term conditions improve, it's hard to accept the current share price as fair value.    

We don't want to rain on the parade too much, but we did also find 4 warning signs for Miko International Holdings (2 don't sit too well with us!) that you need to be mindful of.  

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

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.