Lisheng Sports (Shanghai) Co.,Ltd (SZSE:002858) shareholders have had their patience rewarded with a 25% share price jump in the last month. The last 30 days bring the annual gain to a very sharp 68%.

Even after such a large jump in price, there still wouldn't be many who think Lisheng Sports (Shanghai)Ltd's price-to-sales (or "P/S") ratio of 9.3x is worth a mention when the median P/S in China's Entertainment industry is similar at about 9.2x. 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.

View our latest analysis for Lisheng Sports (Shanghai)Ltd

What Does Lisheng Sports (Shanghai)Ltd's Recent Performance Look Like?

Lisheng Sports (Shanghai)Ltd certainly has been doing a great job lately as it's been growing its revenue at a really rapid pace. The P/S is probably moderate because investors think this strong revenue growth might not be enough to outperform the broader industry in the near future. Those who are bullish on Lisheng Sports (Shanghai)Ltd will be hoping that this isn't the case, so that they can pick up the stock at a lower valuation.

How Is Lisheng Sports (Shanghai)Ltd's Revenue Growth Trending?

There's an inherent assumption that a company should be matching the industry for P/S ratios like Lisheng Sports (Shanghai)Ltd's to be considered reasonable.

If we review the last year of revenue growth, the company posted a terrific increase of 50%. The latest three year period has also seen a 7.6% overall rise in revenue, aided extensively by its short-term performance. Therefore, it's fair to say the revenue growth recently has been respectable for the company.

Comparing that to the industry, which is predicted to deliver 35% growth in the next 12 months, the company's momentum is weaker, based on recent medium-term annualised revenue results.

In light of this, it's curious that Lisheng Sports (Shanghai)Ltd's P/S sits in line with the majority of other companies. Apparently many investors in the company are less bearish than recent times would indicate and aren't willing to let go of their stock right now. Maintaining these prices will be difficult to achieve as a continuation of recent revenue trends is likely to weigh down the shares eventually.

What We Can Learn From Lisheng Sports (Shanghai)Ltd's P/S?

Its shares have lifted substantially and now Lisheng Sports (Shanghai)Ltd's P/S is back within range of the industry median. 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.

Our examination of Lisheng Sports (Shanghai)Ltd 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. 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. Unless there is a significant improvement in the company's medium-term performance, it will be difficult to prevent the P/S ratio from declining to a more reasonable level.

And what about other risks? Every company has them, and we've spotted 3 warning signs for Lisheng Sports (Shanghai)Ltd (of which 2 can't be ignored!) you should know about.

If these risks are making you reconsider your opinion on Lisheng Sports (Shanghai)Ltd, 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.