To the annoyance of some shareholders, TI Cloud Inc. (HKG:2167) shares are down a considerable 49% in the last month, which continues a horrid run for the company. For any long-term shareholders, the last month ends a year to forget by locking in a 76% share price decline.

Since its price has dipped substantially, when close to half the companies operating in Hong Kong's Software industry have price-to-sales ratios (or "P/S") above 1.5x, you may consider TI Cloud as an enticing stock to check out with its 0.9x P/S ratio. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the reduced P/S.

How TI Cloud Has Been Performing

TI Cloud certainly has been doing a good job lately as it's been growing revenue more than most other companies. Perhaps the market is expecting future revenue performance to dive, which has kept the P/S suppressed. 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 out of favour.

Is There Any Revenue Growth Forecasted For TI Cloud?

The only time you'd be truly comfortable seeing a P/S as low as TI Cloud's is when the company's growth is on track to lag the industry.

Retrospectively, the last year delivered an exceptional 17% gain to the company's top line. As a result, it also grew revenue by 26% in total over the last three years. So we can start by confirming that the company has actually done a good job of growing revenue over that time.

Turning to the outlook, the next year should generate growth of 25% as estimated by the lone analyst watching the company. Meanwhile, the rest of the industry is forecast to only expand by 19%, which is noticeably less attractive.

With this information, we find it odd that TI Cloud is trading at a P/S lower than the industry. Apparently some shareholders are doubtful of the forecasts and have been accepting significantly lower selling prices.

The Bottom Line On TI Cloud's P/S

The southerly movements of TI Cloud's shares means its P/S is now sitting at a pretty low level. While the price-to-sales ratio shouldn't be the defining factor in whether you buy a stock or not, it's quite a capable barometer of revenue expectations.

To us, it seems TI Cloud currently trades on a significantly depressed P/S given its forecasted revenue growth is higher than the rest of its industry. There could be some major risk factors that are placing downward pressure on the P/S ratio. At least price risks look to be very low, but investors seem to think future revenues could see a lot of volatility.

Don't forget that there may be other risks. For instance, we've identified 3 warning signs for TI Cloud (2 are a bit concerning) you should be aware of.

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

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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.