It's not a stretch to say that China Tourism And Culture Investment Group Co.,Ltd's (SHSE:600358) price-to-sales (or "P/S") ratio of 5.7x seems quite "middle-of-the-road" for Hospitality companies in China, seeing as it matches the P/S ratio of the wider industry. 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 China Tourism And Culture Investment GroupLtd

How China Tourism And Culture Investment GroupLtd Has Been Performing

As an illustration, revenue has deteriorated at China Tourism And Culture Investment GroupLtd 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 not, then existing shareholders may be a little nervous about the viability of the share price.

How Is China Tourism And Culture Investment GroupLtd's Revenue Growth Trending?

The only time you'd be comfortable seeing a P/S like China Tourism And Culture Investment GroupLtd's is when the company's growth is tracking the industry closely.

Retrospectively, the last year delivered a frustrating 24% decrease to the company's top line. At least revenue has managed not to go completely backwards from three years ago in aggregate, thanks to the earlier period of growth. Therefore, it's fair to say that revenue growth has been inconsistent recently for the company.

This is in contrast to the rest of the industry, which is expected to grow by 37% over the next year, materially higher than the company's recent medium-term annualised growth rates.

With this information, we find it interesting that China Tourism And Culture Investment GroupLtd is trading at a fairly similar P/S compared to the industry. 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.

The Key Takeaway

It's argued the price-to-sales ratio is an inferior measure of value within certain industries, but it can be a powerful business sentiment indicator.

Our examination of China Tourism And Culture Investment GroupLtd revealed its poor three-year revenue trends aren't resulting in a lower P/S as per our expectations, given they look worse than current industry outlook. Right now we are uncomfortable with the P/S as this revenue performance isn't likely to support a more positive sentiment for long. Unless the recent medium-term conditions improve, it's hard to accept the current share price as fair value.

It is also worth noting that we have found 3 warning signs for China Tourism And Culture Investment GroupLtd (1 is a bit unpleasant!) that you need to take into consideration.

If these risks are making you reconsider your opinion on China Tourism And Culture Investment GroupLtd, explore our interactive list of high quality stocks to get an idea of what else is out there.

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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.