SDM Education Group Holdings Limited (HKG:8363) is reasonably priced but lacks growth after its share price soared 66%

Despite having good results to begin with, SDM Education Group Holdings Co., Ltd. (HKG:8363) stock has been on a roll, rising 66% in the past 30 days. The annual increase rate in the past 30 days reached 68%.

Even after such price increases, SDM Education Group Holdings can be thought of as a company that: It is an attractive stock with a P/S ratio of 0.6x. However, it is unwise to take P/S at face value as there may be an explanation as to why it is limited.

Check out our latest analysis for SDM Education Group Holdings.

Performance of SDM Education Group Holdings

SDM Education Group Holdings has been doing well lately, with its earnings growing at a solid pace. Perhaps the market expects this acceptable earnings performance to plummet, which is keeping P&Ls depressed. Even if that doesn't happen, existing shareholders have reason to be optimistic about the future direction of the stock price.

There are no analyst forecasts available for SDM Education Group Holdings, but take a look at this. free Data-rich visualizations show how a company's revenue, revenue, and cash flow stack up.

What are SDM Education Group Holdings' earnings growth trends?

SDM Education Group Holdings' P/S ratio is typical for a company that has limited growth potential and, importantly, is underperforming its industry.

Looking back, the company's sales grew an exceptional 22% last year. As a result, its revenue has also increased by a total of 17% over the past three years. So you can start by checking that the company has actually done a good job of growing its earnings over that period.

Based on recent medium-term annualized earnings results, the company's momentum is weak compared to the industry, which is expected to grow 19% over the next 12 months.

With this in mind, it's easy to see why SDM Education Group Holdings' P&L is below the standards set by its peers. Apparently, many shareholders were reluctant to hang on to something they believed would continue to lag the rest of the industry.

The last word

Despite SDM Education Group Holdings' share price increasing recently, its P&L still lags behind most other companies. The power of the price-to-sales ratio is not primarily a valuation tool, but rather a gauge of current investor sentiment and future expectations.

Our research on SDM Education Group Holdings shows that it has underperformed current industry expectations, and as we suspected, the company's earnings trends over the past three years are primarily responsible for its low price-to-sales ratio. It was confirmed that this was a factor. At this stage, investors feel that the potential for improved earnings is not large enough to justify a higher P/S ratio. Unless recent medium-term conditions improve, stock prices will continue to act as a barrier around these levels.

Before you take the next step, you need to know the following: 3 warning signs for SDM Education Group Holdings (Two of them are potentially serious!) It turns out.

of course, Profitable companies that have a history of strong revenue growth are generally safer choices..So you might want to see this free A collection of other companies with reasonable P/E ratios and strong earnings growth.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts using only unbiased methodologies, and articles are not intended to be financial advice. This is not a recommendation to buy or sell any stock, and does not take into account your objectives or financial situation. We aim to provide long-term, focused analysis based on fundamental data. Note that our analysis may not factor in the latest announcements or qualitative material from price-sensitive companies. Simply Wall St has no position in any stocks mentioned.