Prosper One International Holdings Company Limited (HKG:1470) shares have had a really impressive month, gaining 29% after a shaky period beforehand. The last 30 days bring the annual gain to a very sharp 61%.
In spite of the firm bounce in price, it's still not a stretch to say that Prosper One International Holdings' price-to-sales (or "P/S") ratio of 0.5x right now seems quite "middle-of-the-road" compared to the Trade Distributors industry in Hong Kong, where the median P/S ratio is around 0.4x. However, investors might be overlooking a clear opportunity or potential setback if there is no rational basis for the P/S.
Check out our latest analysis for Prosper One International Holdings
Recent times have been quite advantageous for Prosper One International Holdings as its revenue has been rising very briskly. The P/S is probably moderate because investors think this strong revenue growth might not be enough to outperform the broader industry in the near future. If that doesn't eventuate, then existing shareholders have reason to be feeling optimistic about the future direction of the share price.
We don't have analyst forecasts, but you can see how recent trends are setting up the company for the future by checking out our free report on Prosper One International Holdings' earnings, revenue and cash flow.There's an inherent assumption that a company should be matching the industry for P/S ratios like Prosper One International Holdings' to be considered reasonable.
Taking a look back first, we see that the company grew revenue by an impressive 201% last year. As a result, it also grew revenue by 9.2% in total over the last three years. Therefore, it's fair to say the revenue growth recently has been respectable for the company.
Comparing that to the industry, which is predicted to deliver 4.3% growth in the next 12 months, the company's momentum is pretty similar based on recent medium-term annualised revenue results.
With this information, we can see why Prosper One International Holdings is trading at a fairly similar P/S to the industry. Apparently shareholders are comfortable to simply hold on assuming the company will continue keeping a low profile.
Prosper One International Holdings' stock has a lot of momentum behind it lately, which has brought its P/S level with the rest of 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.
It appears to us that Prosper One International Holdings maintains its moderate P/S off the back of its recent three-year growth being in line with the wider industry forecast. Right now shareholders are comfortable with the P/S as they are quite confident future revenue won't throw up any surprises. Unless the recent medium-term conditions change, they will continue to support the share price at these levels.
Before you take the next step, you should know about the 2 warning signs for Prosper One International Holdings (1 doesn't sit too well with us!) that we have uncovered.
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.
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