With a median price-to-sales (or “P/S”) ratio of near 0.3x within the Construction business in Hong Kong, you might be forgiven for feeling detached about KML Technology Group Limited’s (HKG:8065) P/S ratio of 0.2x. However, traders is likely to be overlooking a transparent alternative or potential setback if there isn’t any rational foundation for the P/S.

Check out our latest analysis for KML Technology Group

How Has KML Technology Group Performed Recently?

Revenue has risen firmly for KML Technology Group just lately, which is agreeable to see. Perhaps the market is anticipating future income efficiency to solely sustain with the broader business, which has preserving the P/S in keeping with expectations. If you want the corporate, you would be hoping this is not the case in order that you might probably choose up some inventory whereas it is not fairly in favour.

Although there aren’t any analyst estimates accessible for KML Technology Group, check out this free data-rich visualisation to see how the corporate stacks up on earnings, income and money circulate.

How Is KML Technology Group’s Revenue Growth Trending?

The solely time you would be snug seeing a P/S like KML Technology Group’s is when the corporate’s development is monitoring the business carefully.

Retrospectively, the final 12 months delivered an distinctive 21% acquire to the corporate’s high line. However, this wasn’t sufficient as the newest three 12 months interval has seen the corporate endure a nasty 28% drop in income in combination. So sadly, we have now to acknowledge that the corporate has not completed an ideal job of rising revenues over that point.

Comparing that to the business, which is predicted to ship 13% development within the subsequent 12 months, the corporate’s downward momentum based mostly on latest medium-term income outcomes is a sobering image.

In mild of this, it is considerably alarming that KML Technology Group’s P/S sits in keeping with the vast majority of different corporations. It appears most traders are ignoring the latest poor development fee and are hoping for a turnaround within the firm’s enterprise prospects. There’s a very good likelihood current shareholders are setting themselves up for future disappointment if the P/S falls to ranges extra in keeping with the latest damaging development charges.

The Bottom Line On KML Technology Group’s P/S

While the price-to-sales ratio should not be the defining consider whether or not you purchase a inventory or not, it is fairly a succesful barometer of income expectations.

Our take a look at KML Technology Group revealed its shrinking revenues over the medium-term have not impacted the P/S as a lot as we anticipated, given the business is about to develop. When we see income heading backwards within the context of rising business forecasts, it’d make sense to anticipate a attainable share value decline on the horizon, sending the average P/S decrease. If latest medium-term income traits proceed, it’s going to place shareholders’ investments in danger and potential traders at risk of paying an pointless premium.

We do not need to rain on the parade an excessive amount of, however we did additionally discover 2 warning signs for KML Technology Group that you have to be aware of.

If corporations with strong previous earnings development is up your alley, you could want 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 basic in nature. We present commentary based mostly on historic information and analyst forecasts solely utilizing an unbiased methodology and our articles usually are not meant to be monetary recommendation. It doesn’t represent a advice to purchase or promote any inventory, and doesn’t take account of your aims, or your monetary scenario. We purpose to convey you long-term centered evaluation pushed by elementary information. Note that our evaluation might not issue within the newest price-sensitive firm bulletins or qualitative materials. Simply Wall St has no place in any shares talked about.