China International Holdings Limited (SGX:BEH) shares have continued their recent momentum with a 59% gain in the last month alone. Longer-term shareholders would be thankful for the recovery in the share price since it's now virtually flat for the year after the recent bounce.
Even after such a large jump in price, China International Holdings' price-to-sales (or "P/S") ratio of 0.4x 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 1.5x 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.
SGX:BEH Price to Sales Ratio vs Industry March 8th 2024
What Does China International Holdings' P/S Mean For Shareholders?
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?
There's an inherent assumption that a company should underperform the industry for P/S ratios like China International Holdings' to be considered reasonable.
In reviewing the last year of financials, we were disheartened to see the company's revenues fell to the tune of 5.5%. The last three years don't look nice either as the company has shrunk revenue by 38% in aggregate. Accordingly, shareholders would have felt downbeat about the medium-term rates of revenue growth.
In contrast to the company, the rest of the industry is expected to grow by 13% over the next year, which really puts the company's recent medium-term revenue decline into perspective.
With this information, we are not surprised that China International Holdings is trading at a P/S lower than the industry. Nonetheless, there's no guarantee the P/S has reached a floor yet with revenue going in reverse. There's potential for the P/S to fall to even lower levels if the company doesn't improve its top-line growth.
The Final Word
The latest share price surge wasn't enough to lift China International Holdings' P/S close to the industry median. 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.
As we suspected, our examination of China International Holdings revealed its shrinking revenue over the medium-term is contributing to its low P/S, given the industry is set 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. Given the current circumstances, it seems unlikely that the share price will experience any significant movement in either direction in the near future if recent medium-term revenue trends persist.
We don't want to rain on the parade too much, but we did also find 4 warning signs for China International Holdings (3 make us uncomfortable!) that you need to be mindful of.
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.
中翔國際(新交所股票代碼:BEH)股價延續了近期的勢頭,僅上個月就上漲了59%。長期股東將對股價的回升表示感謝,因爲在最近的反彈之後的一年中,股價幾乎持平。
即使在價格大幅上漲之後,與新加坡自來水行業相比,中翔國際0.4倍的市銷率(或 “市盈率”)目前仍可能看起來像買入。在新加坡,約有一半公司的市盈率高於1.5倍,甚至市盈率高於4倍也很常見。但是,僅按面值計算市銷率是不明智的,因爲可以解釋其有限的原因。
新加坡證券交易所:BEH 與行業的股價銷售比率 2024 年 3 月 8 日
中翔國際的市銷率對股東意味着什麼?
舉例來說,中翔國際的收入在過去一年中有所惡化,這根本不理想。許多人可能預計,令人失望的收入表現將持續或加速,這抑制了市銷率。如果你喜歡這家公司,你會希望情況並非如此,這樣你就有可能在股票失寵的時候買入一些股票。
想全面了解公司的收益、收入和現金流嗎?那麼我們關於中翔國際的免費報告將幫助您了解其歷史表現。
中翔國際的收入增長趨勢如何?
人們固有的假設是,如果像中翔國際這樣的市銷率被認爲是合理的,公司的表現應該低於該行業。
在回顧去年的財務狀況時,我們沮喪地看到該公司的收入下降至5.5%。過去三年看起來也不太好,因爲該公司的總收入減少了38%。因此,股東會對中期收入增長率感到悲觀。
與該公司形成鮮明對比的是,該行業的其他部門預計將在明年增長13%,這確實可以預見該公司最近的中期收入下降。
有了這些信息,我們對中翔國際的市銷售率低於該行業也就不足爲奇了。但是,尚不能保證市銷率已達到最低水平,收入反向增長。如果公司不改善營收增長,市銷率有可能降至更低的水平。
最後一句話
最近的股價上漲不足以使中翔國際的市銷率接近行業中位數。通常,在做出投資決策時,我們謹慎行事,不要過多地考慮市售比率,儘管這可以揭示其他市場參與者對公司的看法。
正如我們所懷疑的那樣,我們對中翔國際的審查顯示,鑑於該行業的增長,其中期收入的萎縮是其低市銷售率的原因。在現階段,投資者認爲,收入改善的可能性不足以證明更高的市銷率是合理的。鑑於目前的情況,如果最近的中期收入趨勢持續下去,股價似乎不太可能在不久的將來雙向出現任何重大波動。
我們不想在遊行隊伍中下太多雨,但我們也發現了中翔國際的4個警告標誌(3個讓我們感到不舒服!)這是你需要注意的。
如果你喜歡實力雄厚的公司盈利,那麼你會想看看這份以低市盈率(但已證明可以增加收益)的有趣公司的免費名單。
對這篇文章有反饋嗎?對內容感到擔憂嗎?請直接聯繫我們。或者,也可以發送電子郵件至編輯團隊 (at) simplywallst.com。
Simply Wall St的這篇文章本質上是籠統的。我們僅使用公正的方法根據歷史數據和分析師的預測提供評論,我們的文章無意作爲財務建議。它不構成買入或賣出任何股票的建議,也沒有考慮到您的目標或財務狀況。我們的目標是爲您提供由基本數據驅動的長期重點分析。請注意,我們的分析可能不考慮最新的價格敏感型公司公告或定性材料。簡而言之,華爾街沒有持有任何上述股票的頭寸。