It's not a stretch to say that Sitra Holdings (International) Limited's (Catalist:5LE) price-to-sales (or "P/S") ratio of 0.8x right now seems quite "middle-of-the-road" for companies in the Retail Distributors industry in Singapore, where the median P/S ratio is around 0.5x. 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.
Check out our latest analysis for Sitra Holdings (International)
What Does Sitra Holdings (International)'s Recent Performance Look Like?
As an illustration, revenue has deteriorated at Sitra Holdings (International) over the last year, which is not ideal at all. One possibility is that the P/S is moderate because investors think the company might still do enough to be in line with the broader industry in the near future. If you like the company, you'd at least be hoping this is the case so that you could potentially pick up some stock while it's not quite in favour.
Want the full picture on earnings, revenue and cash flow for the company? Then our free report on Sitra Holdings (International) will help you shine a light on its historical performance.
Do Revenue Forecasts Match The P/S Ratio?
In order to justify its P/S ratio, Sitra Holdings (International) would need to produce growth that's similar to the industry.
Retrospectively, the last year delivered a frustrating 18% decrease to the company's top line. However, a few very strong years before that means that it was still able to grow revenue by an impressive 33% in total over the last three years. Although it's been a bumpy ride, it's still fair to say the revenue growth recently has been more than adequate for the company.
This is in contrast to the rest of the industry, which is expected to grow by 17% over the next year, materially higher than the company's recent medium-term annualised growth rates.
With this in mind, we find it intriguing that Sitra Holdings (International)'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. Maintaining these prices will be difficult to achieve as a continuation of recent revenue trends is likely to weigh down the shares eventually.
What We Can Learn From Sitra Holdings (International)'s P/S?
Generally, our preference is to limit the use of the price-to-sales ratio to establishing what the market thinks about the overall health of a company.