Adtiger Corporations Limited's (HKG:1163) Shares Bounce 26% But Its Business Still Trails The Industry

Adtiger Corporations Limited (HKG:1163) shares have had a really impressive month, gaining 26% after a shaky period beforehand. Taking a wider view, although not as strong as the last month, the full year gain of 13% is also fairly reasonable.

Even after such a large jump in price, Adtiger Corporations' price-to-sales (or "P/S") ratio of 0.4x might still make it look like a buy right now compared to the Media industry in Hong Kong, where around half of the companies have P/S ratios above 0.9x and even P/S above 3x are quite common. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the reduced P/S.

Our free stock report includes 4 warning signs investors should be aware of before investing in Adtiger Corporations. Read for free now.

View our latest analysis for Adtiger Corporations

How Has Adtiger Corporations Performed Recently?

Revenue has risen at a steady rate over the last year for Adtiger Corporations, which is generally not a bad outcome. One possibility is that the P/S ratio is low because investors think this good revenue growth might actually underperform the broader industry in the near future. Those who are bullish on Adtiger Corporations will be hoping that this isn't the case, so that they can pick up the stock at a lower valuation.

Want the full picture on earnings, revenue and cash flow for the company? Then our free report on Adtiger Corporations will help you shine a light on its historical performance.

Is There Any Revenue Growth Forecasted For Adtiger Corporations?

There's an inherent assumption that a company should underperform the industry for P/S ratios like Adtiger Corporations' to be considered reasonable.

If we review the last year of revenue growth, the company posted a worthy increase of 3.1%. Ultimately though, it couldn't turn around the poor performance of the prior period, with revenue shrinking 14% in total over the last three years. Therefore, it's fair to say the revenue growth recently has been undesirable for the company.

In contrast to the company, the rest of the industry is expected to grow by 7.8% over the next year, which really puts the company's recent medium-term revenue decline into perspective.

In light of this, it's understandable that Adtiger Corporations' P/S would sit below the majority of other companies. Nonetheless, there's no guarantee the P/S has reached a floor yet with revenue going in reverse. Even just maintaining these prices could be difficult to achieve as recent revenue trends are already weighing down the shares.

What Does Adtiger Corporations' P/S Mean For Investors?

The latest share price surge wasn't enough to lift Adtiger Corporations' P/S close to the industry median. Using the price-to-sales ratio alone to determine if you should sell your stock isn't sensible, however it can be a practical guide to the company's future prospects.

It's no surprise that Adtiger Corporations maintains its low P/S off the back of its sliding revenue over the medium-term. 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.

You need to take note of risks, for example - Adtiger Corporations has 4 warning signs (and 1 which doesn't sit too well with us) we think you should know about.

If you're unsure about the strength of Adtiger Corporations' business, why not explore our interactive list of stocks with solid business fundamentals for some other companies you may have missed.

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.