Even With A 27% Surge, Cautious Investors Are Not Rewarding S.A.I. Leisure Group Company Limited's (HKG:1832) Performance Completely
S.A.I. Leisure Group Company Limited (HKG:1832) shares have had a really impressive month, gaining 27% after a shaky period beforehand. Looking back a bit further, it's encouraging to see the stock is up 27% in the last year.
Although its price has surged higher, you could still be forgiven for feeling indifferent about S.A.I. Leisure Group's P/S ratio of 0.8x, since the median price-to-sales (or "P/S") ratio for the Hospitality 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.
See our latest analysis for S.A.I. Leisure Group
What Does S.A.I. Leisure Group's P/S Mean For Shareholders?
For instance, S.A.I. Leisure Group's receding revenue in recent times would have to be some food for thought. One possibility is that the P/S is moderate because investors think the company might still do enough to be in line with the broader industry in the near future. If you like the company, you'd at least be hoping this is the case so that you could potentially pick up some stock while it's not quite in favour.
Although there are no analyst estimates available for S.A.I. Leisure Group, 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 S.A.I. Leisure Group?
S.A.I. Leisure Group'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, the company's revenue growth last year wasn't something to get excited about as it posted a disappointing decline of 1.8%. Still, the latest three year period has seen an excellent 105% overall rise in revenue, in spite of its unsatisfying short-term performance. Accordingly, while they would have preferred to keep the run going, shareholders would definitely welcome the medium-term rates of revenue growth.
When compared to the industry's one-year growth forecast of 13%, the most recent medium-term revenue trajectory is noticeably more alluring
In light of this, it's curious that S.A.I. Leisure Group's P/S sits in line with the majority of other companies. It may be that most investors are not convinced the company can maintain its recent growth rates.
The Final Word
S.A.I. Leisure Group appears to be back in favour with a solid price jump bringing its P/S back in line with other companies in the industry 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 didn't quite envision S.A.I. Leisure Group's P/S sitting in line with the wider industry, considering the revenue growth over the last three-year is higher than the current industry outlook. When we see strong revenue with faster-than-industry growth, we can only assume potential risks are what might be placing pressure on the P/S ratio. While recent revenue trends over the past medium-term suggest that the risk of a price decline is low, investors appear to see the likelihood of revenue fluctuations in the future.
There are also other vital risk factors to consider and we've discovered 3 warning signs for S.A.I. Leisure Group (2 can't be ignored!) that you should be aware of before investing here.
If strong companies turning a profit tickle your fancy, then you'll want to check out this free list of interesting companies that trade on a low P/E (but have proven they can grow earnings).
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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.