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Why Investors Shouldn't Be Surprised By Dafeng Port Heshun Technology Company Limited's (HKG:8310) 37% Share Price Surge

Simply Wall St ·  Jan 13 17:35

Despite an already strong run, Dafeng Port Heshun Technology Company Limited (HKG:8310) shares have been powering on, with a gain of 37% in the last thirty days. Looking further back, the 21% rise over the last twelve months isn't too bad notwithstanding the strength over the last 30 days.

Although its price has surged higher, you could still be forgiven for feeling indifferent about Dafeng Port Heshun Technology's P/S ratio of 0.4x, since the median price-to-sales (or "P/S") ratio for the Trade Distributors industry in Hong Kong is about the same. However, investors might be overlooking a clear opportunity or potential setback if there is no rational basis for the P/S.

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SEHK:8310 Price to Sales Ratio vs Industry January 13th 2025

What Does Dafeng Port Heshun Technology's Recent Performance Look Like?

Dafeng Port Heshun Technology certainly has been doing a great job lately as it's been growing its revenue at a really rapid pace. It might be that many expect the strong revenue performance to wane, which has kept the share price, and thus the P/S ratio, from rising. Those who are bullish on Dafeng Port Heshun Technology will be hoping that this isn't the case, so that they can pick up the stock at a lower valuation.

Although there are no analyst estimates available for Dafeng Port Heshun Technology, 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 Dafeng Port Heshun Technology?

Dafeng Port Heshun Technology's P/S ratio would be typical for a company that's only expected to deliver moderate growth, and importantly, perform in line with the industry.

Taking a look back first, we see that the company grew revenue by an impressive 52% last year. Revenue has also lifted 11% in aggregate from three years ago, mostly thanks to the last 12 months of growth. Accordingly, shareholders would have probably been satisfied with the medium-term rates of revenue growth.

Weighing that recent medium-term revenue trajectory against the broader industry's one-year forecast for expansion of 3.0% shows it's about the same on an annualised basis.

With this information, we can see why Dafeng Port Heshun Technology is trading at a fairly similar P/S to the industry. It seems most investors are expecting to see average growth rates continue into the future and are only willing to pay a moderate amount for the stock.

The Bottom Line On Dafeng Port Heshun Technology's P/S

Its shares have lifted substantially and now Dafeng Port Heshun Technology's P/S is back within range of the industry median. 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.

It appears to us that Dafeng Port Heshun Technology maintains its moderate P/S off the back of its recent three-year growth being in line with the wider industry forecast. With previous revenue trends that keep up with the current industry outlook, it's hard to justify the company's P/S ratio deviating much from it's current point. Unless the recent medium-term conditions change, they will continue to support the share price at these levels.

Don't forget that there may be other risks. For instance, we've identified 5 warning signs for Dafeng Port Heshun Technology (2 make us uncomfortable) you should be aware of.

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.

Disclaimer: This content is for informational and educational purposes only and does not constitute a recommendation or endorsement of any specific investment or investment strategy. Read more
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