Dafeng Port Heshun Technology Company Limited (HKG:8310) shareholders would be excited to see that the share price has had a great month, posting a 30% gain and recovering from prior weakness. The bad news is that even after the stocks recovery in the last 30 days, shareholders are still underwater by about 2.5% over the last year.

Even after such a large jump in price, it's still not a stretch to say that Dafeng Port Heshun Technology's price-to-sales (or "P/S") ratio of 0.4x right now seems quite "middle-of-the-road" compared to the Trade Distributors industry in Hong Kong, where the median P/S ratio is around 0.5x. 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.

How Dafeng Port Heshun Technology Has Been Performing

With revenue growth that's exceedingly strong of late, Dafeng Port Heshun Technology has been doing very well. 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 you like the company, you'd be hoping this isn't the case so that you could potentially pick up some stock while it's not quite in favour.

Is There Some Revenue Growth Forecasted For Dafeng Port Heshun Technology?

There's an inherent assumption that a company should be matching the industry for P/S ratios like Dafeng Port Heshun Technology's to be considered reasonable.

Retrospectively, the last year delivered an exceptional 52% gain to the company's top line. Revenue has also lifted 11% 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.

It's interesting to note that the rest of the industry is similarly expected to grow by 3.2% over the next year, which is fairly even with the company's recent medium-term annualised growth rates.

In light of this, it's understandable that Dafeng Port Heshun Technology's P/S sits in line with the majority of other companies. Apparently shareholders are comfortable to simply hold on assuming the company will continue keeping a low profile.

What Does Dafeng Port Heshun Technology's P/S Mean For Investors?

Dafeng Port Heshun Technology appears to be back in favour with a solid price jump bringing its P/S back in line with other companies in the industry While the price-to-sales ratio shouldn't be the defining factor in whether you buy a stock or not, it's quite a capable barometer of revenue expectations.

It appears to us that Dafeng Port Heshun Technology maintains its moderate P/S off the back of its recent three-year growth being in line with the wider industry forecast. With previous revenue trends that keep up with the current industry outlook, it's hard to justify the company's P/S ratio deviating much from it's current point. Unless the recent medium-term conditions change, they will continue to support the share price at these levels.

It is also worth noting that we have found 5 warning signs for Dafeng Port Heshun Technology (2 are a bit concerning!) that you need to take into consideration.

If these risks are making you reconsider your opinion on Dafeng Port Heshun Technology, 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.