Qeeka Home (Cayman) Inc. (HKG:1739) shares have had a horrible month, losing 28% after a relatively good period beforehand. Instead of being rewarded, shareholders who have already held through the last twelve months are now sitting on a 20% share price drop.

Following the heavy fall in price, when close to half the companies operating in Hong Kong's Consumer Services industry have price-to-sales ratios (or "P/S") above 1.1x, you may consider Qeeka Home (Cayman) as an enticing stock to check out with its 0.3x P/S ratio. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the reduced P/S.

How Has Qeeka Home (Cayman) Performed Recently?

With revenue growth that's exceedingly strong of late, Qeeka Home (Cayman) has been doing very well. One possibility is that the P/S ratio is low because investors think this strong revenue growth might actually underperform the broader industry in the near future. If that doesn't eventuate, then existing shareholders have reason to be quite optimistic about the future direction of the share price.

Is There Any Revenue Growth Forecasted For Qeeka Home (Cayman)?

Qeeka Home (Cayman)'s P/S ratio would be typical for a company that's only expected to deliver limited growth, and importantly, perform worse than the industry.

Taking a look back first, we see that the company grew revenue by an impressive 36% last year. Revenue has also lifted 30% in aggregate from three years ago, mostly thanks to the last 12 months of growth. Therefore, it's fair to say the revenue growth recently has been respectable for the company.

Comparing the recent medium-term revenue trends against the industry's one-year growth forecast of 18% shows it's noticeably less attractive.

With this in consideration, it's easy to understand why Qeeka Home (Cayman)'s P/S falls short of the mark set by its industry peers. Apparently many shareholders weren't comfortable holding on to something they believe will continue to trail the wider industry.

The Final Word

Qeeka Home (Cayman)'s P/S has taken a dip along with its share price. Using the price-to-sales ratio alone to determine if you should sell your stock isn't sensible, however it can be a practical guide to the company's future prospects.

As we suspected, our examination of Qeeka Home (Cayman) revealed its three-year revenue trends are contributing to its low P/S, given they look worse than current industry expectations. Right now shareholders are accepting the low P/S as they concede future revenue probably won't provide any pleasant surprises. Unless the recent medium-term conditions improve, they will continue to form a barrier for the share price around these levels.

Before you take the next step, you should know about the 4 warning signs for Qeeka Home (Cayman) (2 are concerning!) that we have uncovered.

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.