With a median price-to-sales (or "P/S") ratio of close to 1.4x in the Logistics industry in China, you could be forgiven for feeling indifferent about Shanghai Ace Investment&Development Co.,Ltd's (SHSE:603329) P/S ratio of 1.3x. 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 Shanghai Ace Investment&DevelopmentLtd

What Does Shanghai Ace Investment&DevelopmentLtd's Recent Performance Look Like?

As an illustration, revenue has deteriorated at Shanghai Ace Investment&DevelopmentLtd 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 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.

How Is Shanghai Ace Investment&DevelopmentLtd's Revenue Growth Trending?

The only time you'd be comfortable seeing a P/S like Shanghai Ace Investment&DevelopmentLtd's is when the company's growth is tracking the industry closely.

In reviewing the last year of financials, we were disheartened to see the company's revenues fell to the tune of 29%. Even so, admirably revenue has lifted 46% in aggregate from three years ago, notwithstanding the last 12 months. Accordingly, while they would have preferred to keep the run going, shareholders would definitely welcome the medium-term rates of revenue growth.

Comparing that to the industry, which is predicted to deliver 16% growth in the next 12 months, the company's momentum is weaker, based on recent medium-term annualised revenue results.

With this in mind, we find it intriguing that Shanghai Ace Investment&DevelopmentLtd's P/S is comparable to that of its industry peers. 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.

The Bottom Line On Shanghai Ace Investment&DevelopmentLtd's P/S

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.

We've established that Shanghai Ace Investment&DevelopmentLtd's average P/S is a bit surprising since its recent three-year growth is lower than the wider industry forecast. Right now we are uncomfortable with the P/S as this revenue performance isn't likely to support a more positive sentiment for long. If recent medium-term revenue trends continue, the probability of a share price decline will become quite substantial, placing shareholders at risk.

Before you settle on your opinion, we've discovered 4 warning signs for Shanghai Ace Investment&DevelopmentLtd (1 makes us a bit uncomfortable!) that you should be aware of.

If these risks are making you reconsider your opinion on Shanghai Ace Investment&DevelopmentLtd, 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.