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Deewin Tianxia Co., Ltd's (HKG:2418) 35% Price Boost Is Out Of Tune With Revenues

Simply Wall St · 4d ago

Deewin Tianxia Co., Ltd (HKG:2418) shares have continued their recent momentum with a 35% gain in the last month alone. The last 30 days were the cherry on top of the stock's 656% gain in the last year, which is nothing short of spectacular.

After such a large jump in price, when almost half of the companies in Hong Kong's Transportation industry have price-to-sales ratios (or "P/S") below 0.6x, you may consider Deewin Tianxia as a stock not worth researching with its 7.5x P/S ratio. However, the P/S might be quite high for a reason and it requires further investigation to determine if it's justified.

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See our latest analysis for Deewin Tianxia

ps-multiple-vs-industry
SEHK:2418 Price to Sales Ratio vs Industry January 2nd 2026

What Does Deewin Tianxia's P/S Mean For Shareholders?

For example, consider that Deewin Tianxia's financial performance has been poor lately as its revenue has been in decline. Perhaps the market believes the company can do enough to outperform the rest of the industry in the near future, which is keeping the P/S ratio high. You'd really hope so, otherwise you're paying a pretty hefty price for no particular reason.

Want the full picture on earnings, revenue and cash flow for the company? Then our free report on Deewin Tianxia will help you shine a light on its historical performance.

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

The only time you'd be truly comfortable seeing a P/S as steep as Deewin Tianxia's is when the company's growth is on track to outshine the industry decidedly.

In reviewing the last year of financials, we were disheartened to see the company's revenues fell to the tune of 15%. The last three years don't look nice either as the company has shrunk revenue by 8.0% in aggregate. Accordingly, shareholders would have felt downbeat about the medium-term rates of revenue growth.

In contrast to the company, the rest of the industry is expected to grow by 3.5% over the next year, which really puts the company's recent medium-term revenue decline into perspective.

With this in mind, we find it worrying that Deewin Tianxia's P/S exceeds that of its industry peers. Apparently many investors in the company are way more bullish than recent times would indicate and aren't willing to let go of their stock at any price. There's a very good chance existing shareholders are setting themselves up for future disappointment if the P/S falls to levels more in line with the recent negative growth rates.

The Bottom Line On Deewin Tianxia's P/S

The strong share price surge has lead to Deewin Tianxia's P/S soaring as well. 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.

We've established that Deewin Tianxia currently trades on a much higher than expected P/S since its recent revenues have been in decline over the medium-term. When we see revenue heading backwards and underperforming the industry forecasts, we feel the possibility of the share price declining is very real, bringing the P/S back into the realm of reasonability. If recent medium-term revenue trends continue, it will place shareholders' investments at significant risk and potential investors in danger of paying an excessive premium.

It is also worth noting that we have found 3 warning signs for Deewin Tianxia that you need to take into consideration.

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