When close to half the companies operating in the Logistics industry in China have price-to-sales ratios (or "P/S") above 1.2x, you may consider STO Express Co.,Ltd (SZSE:002468) as an attractive investment with its 0.3x P/S ratio. However, the P/S might be low for a reason and it requires further investigation to determine if it's justified.

What Does STO ExpressLtd's Recent Performance Look Like?

With its revenue growth in positive territory compared to the declining revenue of most other companies, STO ExpressLtd has been doing quite well of late. Perhaps the market is expecting future revenue performance to follow the rest of the industry downwards, which has kept the P/S suppressed. If not, then existing shareholders have reason to be quite optimistic about the future direction of the share price.

Do Revenue Forecasts Match The Low P/S Ratio?

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

Retrospectively, the last year delivered an exceptional 20% gain to the company's top line. The strong recent performance means it was also able to grow revenue by 76% in total over the last three years. Therefore, it's fair to say the revenue growth recently has been superb for the company.

Turning to the outlook, the next three years should generate growth of 7.5% per year as estimated by the twelve analysts watching the company. With the industry predicted to deliver 9.1% growth each year, the company is positioned for a comparable revenue result.

With this in consideration, we find it intriguing that STO ExpressLtd's P/S is lagging behind its industry peers. It may be that most investors are not convinced the company can achieve future growth expectations.

The Bottom Line On STO ExpressLtd's P/S

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 STO ExpressLtd's revealed that its P/S remains low despite analyst forecasts of revenue growth matching the wider industry. The low P/S could be an indication that the revenue growth estimates are being questioned by the market. Perhaps investors are concerned that the company could underperform against the forecasts over the near term.

It's always necessary to consider the ever-present spectre of investment risk. We've identified 1 warning sign with STO ExpressLtd, and understanding should be part of your investment process.

If companies with solid past earnings growth is up your alley, you may wish to see this free collection of other companies with strong earnings growth and low P/E ratios.

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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.