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Risks To Shareholder Returns Are Elevated At These Prices For IRICO Group New Energy Company Limited (HKG:438)

Simply Wall St · 4d ago

With a median price-to-sales (or "P/S") ratio of close to 0.5x in the Electronic industry in Hong Kong, you could be forgiven for feeling indifferent about IRICO Group New Energy Company Limited's (HKG:438) P/S ratio of 0.1x. 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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View our latest analysis for IRICO Group New Energy

ps-multiple-vs-industry
SEHK:438 Price to Sales Ratio vs Industry January 8th 2026

How Has IRICO Group New Energy Performed Recently?

For instance, IRICO Group New Energy's receding revenue in recent times would have to be some food for thought. 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.

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 IRICO Group New Energy's earnings, revenue and cash flow.

Is There Some Revenue Growth Forecasted For IRICO Group New Energy?

There's an inherent assumption that a company should be matching the industry for P/S ratios like IRICO Group New Energy's to be considered reasonable.

Retrospectively, the last year delivered a frustrating 29% decrease to the company's top line. Still, the latest three year period has seen an excellent 39% overall rise in revenue, in spite of its unsatisfying short-term performance. So we can start by confirming that the company has generally done a very good job of growing revenue over that time, even though it had some hiccups along the way.

Comparing the recent medium-term revenue trends against the industry's one-year growth forecast of 18% shows it's noticeably less attractive.

With this in mind, we find it intriguing that IRICO Group New Energy's P/S is comparable to that of its industry peers. It seems most investors are ignoring the fairly limited recent growth rates and are willing to pay up for exposure to the stock. 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 IRICO Group New Energy's P/S Mean For Investors?

Typically, we'd caution against reading too much into price-to-sales ratios when settling on investment decisions, though it can reveal plenty about what other market participants think about the company.

We've established that IRICO Group New Energy's average P/S is a bit surprising since its recent three-year growth is lower than the wider industry forecast. 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's always necessary to consider the ever-present spectre of investment risk. We've identified 3 warning signs with IRICO Group New Energy (at least 2 which are a bit unpleasant), and understanding these should be part of your investment process.

If these risks are making you reconsider your opinion on IRICO Group New Energy, explore our interactive list of high quality stocks to get an idea of what else is out there.