The HSC Resources Group Limited (HKG:1850) share price has fared very poorly over the last month, falling by a substantial 70%. The recent drop completes a disastrous twelve months for shareholders, who are sitting on a 87% loss during that time.

Even after such a large drop in price, it's still not a stretch to say that HSC Resources Group's price-to-sales (or "P/S") ratio of 0.1x right now seems quite "middle-of-the-road" compared to the Commercial Services industry in Hong Kong, where the median P/S ratio is around 0.5x. However, investors might be overlooking a clear opportunity or potential setback if there is no rational basis for the P/S.

What Does HSC Resources Group's P/S Mean For Shareholders?

Recent times have been quite advantageous for HSC Resources Group as its revenue has been rising very briskly. 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. If that doesn't eventuate, then existing shareholders have reason to be feeling optimistic about the future direction of the share price.

Is There Some Revenue Growth Forecasted For HSC Resources Group?

There's an inherent assumption that a company should be matching the industry for P/S ratios like HSC Resources Group's to be considered reasonable.

Retrospectively, the last year delivered an exceptional 68% gain to the company's top line. The strong recent performance means it was also able to grow revenue by 106% in total over the last three years. So we can start by confirming that the company has done a great job of growing revenue over that time.

When compared to the industry's one-year growth forecast of 8.9%, the most recent medium-term revenue trajectory is noticeably more alluring

With this information, we find it interesting that HSC Resources Group 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.

What We Can Learn From HSC Resources Group's P/S?

HSC Resources Group's plummeting stock price has brought its P/S back to a similar region as the rest of the industry. Generally, our preference is to limit the use of the price-to-sales ratio to establishing what the market thinks about the overall health of a company.

To our surprise, HSC Resources Group revealed its three-year revenue trends aren't contributing to its P/S as much as we would have predicted, given they look better than current industry expectations. 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.

And what about other risks? Every company has them, and we've spotted 5 warning signs for HSC Resources Group you should know about.

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.

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