Grand Power Logistics Group Limited's (HKG:8489) 129% Price Boost Is Out Of Tune With Revenues

Despite an already strong run, Grand Power Logistics Group Limited (HKG:8489) shares have been powering on, with a gain of 129% in the last thirty days. The annual gain comes to 143% following the latest surge, making investors sit up and take notice.

In spite of the firm bounce in price, there still wouldn't be many who think Grand Power Logistics Group's price-to-sales (or "P/S") ratio of 0.1x is worth a mention when the median P/S in Hong Kong's Logistics industry is similar at about 0.2x. Although, it's not wise to simply ignore the P/S without explanation as investors may be disregarding a distinct opportunity or a costly mistake.

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View our latest analysis for Grand Power Logistics Group

What Does Grand Power Logistics Group's P/S Mean For Shareholders?

Grand Power Logistics Group has been doing a decent job lately as it's been growing revenue at a reasonable pace. It might be that many expect the respectable revenue performance to only match most other companies over the coming period, which has kept the P/S from rising. 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 not quite in favour.

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 Grand Power Logistics Group's earnings, revenue and cash flow.

What Are Revenue Growth Metrics Telling Us About The P/S?

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

Retrospectively, the last year delivered a decent 3.4% gain to the company's revenues. Although, the latest three year period in total hasn't been as good as it didn't manage to provide any growth at all. So it appears to us that the company has had a mixed result in terms of growing revenue over that time.

Comparing that to the industry, which is predicted to deliver 14% growth in the next 12 months, the company's momentum is weaker, based on recent medium-term annualised revenue results.

With this in mind, we find it intriguing that Grand Power Logistics Group's P/S is comparable to that of its industry peers. Apparently many investors in the company are less bearish than recent times would indicate and aren't willing to let go of their stock right now. They may be setting themselves up for future disappointment if the P/S falls to levels more in line with recent growth rates.

What Does Grand Power Logistics Group's P/S Mean For Investors?

Grand Power Logistics Group appears to be back in favour with a solid price jump bringing its P/S back in line with other companies in 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.

Our examination of Grand Power Logistics Group revealed its poor three-year revenue trends aren't resulting in a lower P/S as per our expectations, given they look worse than current industry outlook. When we see weak revenue with slower than industry growth, we suspect the share price is at risk of declining, bringing the P/S back in line with expectations. If recent medium-term revenue trends continue, the probability of a share price decline will become quite substantial, placing shareholders at risk.

It is also worth noting that we have found 3 warning signs for Grand Power Logistics Group (2 can't be ignored!) that you need to take into consideration.

Of course, profitable companies with a history of great earnings growth are generally safer bets. So you may wish to see this free collection of other companies that have reasonable P/E ratios and have grown earnings strongly.

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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.