The i.century Holding Limited (HKG:8507) share price has done very well over the last month, posting an excellent gain of 30%. Unfortunately, despite the strong performance over the last month, the full year gain of 6.2% isn't as attractive.

In spite of the firm bounce in price, you could still be forgiven for feeling indifferent about i.century Holding's P/S ratio of 0.4x, since the median price-to-sales (or "P/S") ratio for the Luxury industry in Hong Kong is also close to 0.6x. While this might not raise any eyebrows, if the P/S ratio is not justified investors could be missing out on a potential opportunity or ignoring looming disappointment.

How Has i.century Holding Performed Recently?

For example, consider that i.century Holding's financial performance has been poor lately as its revenue has been in decline. 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.

Do Revenue Forecasts Match The P/S Ratio?

i.century Holding's P/S ratio would be typical for a company that's only expected to deliver moderate growth, and importantly, perform in line with the industry.

Retrospectively, the last year delivered a frustrating 38% decrease to the company's top line. Even so, admirably revenue has lifted 50% in aggregate from three years ago, notwithstanding the last 12 months. Although it's been a bumpy ride, it's still fair to say the revenue growth recently has been more than adequate for the company.

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

With this information, we find it interesting that i.century Holding is trading at a fairly similar P/S compared to the industry. It may be that most investors are not convinced the company can maintain its recent growth rates.

The Bottom Line On i.century Holding's P/S

i.century Holding's stock has a lot of momentum behind it lately, which has brought its P/S level with the rest of the industry. 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.

We've established that i.century Holding currently trades on a lower than expected P/S since its recent three-year growth is higher than the wider industry forecast. There could be some unobserved threats to revenue preventing the P/S ratio from matching this positive performance. It appears some are indeed anticipating revenue instability, because the persistence of these recent medium-term conditions would normally provide a boost to the share price.

Having said that, be aware i.century Holding is showing 2 warning signs in our investment analysis, you should know about.

If strong companies turning a profit tickle your fancy, then you'll want to check out this free list of interesting companies that trade on a low P/E (but have proven they can grow earnings).

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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.