The Market Lifts Times Universal Group Holdings Limited (HKG:2310) Shares 29% But It Can Do More

Times Universal Group Holdings Limited (HKG:2310) shareholders would be excited to see that the share price has had a great month, posting a 29% gain and recovering from prior weakness. Looking further back, the 13% rise over the last twelve months isn't too bad notwithstanding the strength over the last 30 days.

In spite of the firm bounce in price, there still wouldn't be many who think Times Universal Group Holdings' price-to-sales (or "P/S") ratio of 0.4x is worth a mention when the median P/S in Hong Kong's Real Estate industry is similar at about 0.7x. While this might not raise any eyebrows, if the P/S ratio is not justified investors could be missing out on a potential opportunity or ignoring looming disappointment.

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Check out our latest analysis for Times Universal Group Holdings

What Does Times Universal Group Holdings' Recent Performance Look Like?

The recent revenue growth at Times Universal Group Holdings would have to be considered satisfactory if not spectacular. One possibility is that the P/S is moderate because investors think this good revenue growth might only be parallel to the broader industry in the near future. Those who are bullish on Times Universal Group Holdings will be hoping that this isn't the case, so that they can pick up the stock at a lower valuation.

Do Revenue Forecasts Match The P/S Ratio?

The only time you'd be comfortable seeing a P/S like Times Universal Group Holdings' is when the company's growth is tracking the industry closely.

Retrospectively, the last year delivered a decent 7.2% gain to the company's revenues. The solid recent performance means it was also able to grow revenue by 29% 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 recent medium-term revenue trajectory with the industry's one-year growth forecast of 5.3% shows it's noticeably more attractive.

With this information, we find it interesting that Times Universal Group Holdings is trading at a fairly similar P/S compared to the industry. It may be that most investors are not convinced the company can maintain its recent growth rates.

What We Can Learn From Times Universal Group Holdings' P/S?

Times Universal Group Holdings' stock has a lot of momentum behind it lately, which has brought its P/S level with the rest of the industry. 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.

We didn't quite envision Times Universal Group Holdings' 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. It'd be fair to assume that potential risks the company faces could be the contributing factor to the lower than expected P/S. 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.

We don't want to rain on the parade too much, but we did also find 2 warning signs for Times Universal Group Holdings that you need to be mindful of.

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

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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.