Despite an already strong run, Bestore Co.,Ltd (SHSE:603719) shares have been powering on, with a gain of 31% in the last thirty days. Unfortunately, the gains of the last month did little to right the losses of the last year with the stock still down 19% over that time.

Although its price has surged higher, BestoreLtd's price-to-sales (or "P/S") ratio of 0.9x might still make it look like a buy right now compared to the Food industry in China, where around half of the companies have P/S ratios above 2x and even P/S above 4x are quite common. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the reduced P/S.

What Does BestoreLtd's P/S Mean For Shareholders?

While the industry has experienced revenue growth lately, BestoreLtd's revenue has gone into reverse gear, which is not great. Perhaps the P/S remains low as investors think the prospects of strong revenue growth aren't on the horizon. So while you could say the stock is cheap, investors will be looking for improvement before they see it as good value.

Is There Any Revenue Growth Forecasted For BestoreLtd?

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

Retrospectively, the last year delivered a frustrating 11% decrease to the company's top line. This means it has also seen a slide in revenue over the longer-term as revenue is down 16% in total over the last three years. Accordingly, shareholders would have felt downbeat about the medium-term rates of revenue growth.

Turning to the outlook, the next year should generate growth of 19% as estimated by the four analysts watching the company. With the industry only predicted to deliver 16%, the company is positioned for a stronger revenue result.

In light of this, it's peculiar that BestoreLtd's P/S sits below the majority of other companies. It looks like most investors are not convinced at all that the company can achieve future growth expectations.

The Final Word

The latest share price surge wasn't enough to lift BestoreLtd's P/S close to the industry median. It's argued the price-to-sales ratio is an inferior measure of value within certain industries, but it can be a powerful business sentiment indicator.

A look at BestoreLtd's revenues reveals that, despite glowing future growth forecasts, its P/S is much lower than we'd expect. The reason for this depressed P/S could potentially be found in the risks the market is pricing in. While the possibility of the share price plunging seems unlikely due to the high growth forecasted for the company, the market does appear to have some hesitation.

Before you take the next step, you should know about the 3 warning signs for BestoreLtd that we have uncovered.

If you're unsure about the strength of BestoreLtd's business, why not explore our interactive list of stocks with solid business fundamentals for some other companies you may have missed.

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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.