Blue Moon Group Holdings (SEHK:6993) Looks Pricey As Interim Earnings Cut Losses

Why Blue Moon Group Holdings Stock Is In Focus After Interim Earnings

Blue Moon Group Holdings (SEHK:6993) has moved back onto investor radars after its latest half year results showed lower sales but a much smaller net loss, providing fresh context for the recent share price performance.

The interim earnings update appears to have come at a time when momentum in Blue Moon Group Holdings' stock has been building, with a 7 day share price return of 12.18% and a year to date share price return of 36.13%, while the 5 year total shareholder return of a 38.22% decline shows the longer term picture has been much tougher.

Compare Blue Moon Group Holdings' turnaround story with other consumer stocks that screen well on profitability and balance sheet strength using the curated list of solid balance sheet and fundamentals (427 results).

The recent jump in Blue Moon Group Holdings' share price sits above both the HK$2.53 analyst target and some intrinsic value estimates. Is this a fair reset, or has the market moved ahead of fundamentals?

Price-to-Sales of 2.6x: Is It Justified For Blue Moon Group Holdings?

On the current numbers, Blue Moon Group Holdings looks expensive on its preferred valuation yardstick. The stock trades on a P/S ratio of 2.6x, while peers in the Household Products space are on 0.5x and the wider Asian Household Products industry averages 1x.

The P/S multiple compares the company’s market value to its revenue, which is useful when earnings are negative and P/E cannot be applied in a meaningful way. For Blue Moon Group Holdings, which is still loss making and reported annual revenue of HK$8,254.9m with a net loss of HK$86.1m, the P/S becomes one of the clearer reference points for how the market is weighing its sales base.

Against that backdrop, a 2.6x P/S suggests investors are currently paying a much richer tag for each dollar of Blue Moon Group Holdings' revenue than is typical across both its direct peer group and the broader regional industry. The estimated fair P/S ratio of 1.3x also sits well below the current level, which points to a valuation that could move closer to that fair ratio level if sentiment or expectations change.

To go deeper into how this fair P/S level is calculated and what it implies for the shares, check the Explore the SWS fair ratio for Blue Moon Group Holdings.

Result: Price-to-Sales of 2.6x (OVERVALUED)

However, the Blue Moon Group Holdings narrative could be tested if annual revenue, which recently slipped, stays under pressure or if net losses widen from the current HK$86.1m.

Find out about the key risks to this Blue Moon Group Holdings narrative.

Another View On Blue Moon Group Holdings Using The SWS DCF Model

While the current 2.6x P/S ratio makes Blue Moon Group Holdings look expensive against peers, the SWS DCF model points in the same direction. At HK$3.73 the stock trades well above an estimated future cash flow value of HK$0.76, which implies limited margin for error if expectations change.

To understand how this future cash flow value is built up and which inputs matter most for Blue Moon Group Holdings, take a look at the Look into how the SWS DCF model arrives at its fair value..

Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out Blue Moon Group Holdings for example). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes, or use our stock screener to discover 267 high quality undervalued stocks. If you save a screener we even alert you when new companies match - so you never miss a potential opportunity.

Next Steps

If the mixed signals around Blue Moon Group Holdings leave you uncertain, review the numbers yourself and form a view quickly while sentiment is still shifting. A good place to start is understanding the 2 important warning signs.

Looking For More Investment Ideas Beyond Blue Moon Group Holdings?

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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.

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