Sinostar PEC Holdings Limited (SGX:C9Q) 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 8.0% over the last year.

Even after such a large jump in price, you could still be forgiven for feeling indifferent about Sinostar PEC Holdings' P/S ratio of 0.1x, since the median price-to-sales (or "P/S") ratio for the Oil and Gas industry in Singapore is about the same. 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.

View our latest analysis for Sinostar PEC Holdings

What Does Sinostar PEC Holdings' Recent Performance Look Like?

Sinostar PEC Holdings has been doing a decent job lately as it's been growing revenue at a reasonable pace. One possibility is that the P/S is moderate because investors think this good revenue growth might only be parallel to the broader industry in the near future. Those who are bullish on Sinostar PEC Holdings will be hoping that this isn't the case, so that they can pick up the stock at a lower valuation.

What Are Revenue Growth Metrics Telling Us About The P/S?

The only time you'd be comfortable seeing a P/S like Sinostar PEC Holdings' is when the company's growth is tracking the industry closely.

Retrospectively, the last year delivered a decent 3.0% gain to the company's revenues. Pleasingly, revenue has also lifted 52% in aggregate from three years ago, partly thanks to the last 12 months of growth. Accordingly, shareholders would have definitely welcomed those medium-term rates of revenue growth.

Comparing that to the industry, which is predicted to shrink 7.5% in the next 12 months, the company's positive momentum based on recent medium-term revenue results is a bright spot for the moment.

With this in mind, we find it intriguing that Sinostar PEC Holdings' P/S matches its industry peers. Apparently some shareholders believe the recent performance is at its limits and have been accepting lower selling prices.

What Does Sinostar PEC Holdings' P/S Mean For Investors?

Sinostar PEC Holdings appears to be back in favour with a solid price jump bringing its P/S back in line with other companies in 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.

As mentioned previously, Sinostar PEC Holdings currently trades on a P/S on par with the wider industry, but this is lower than expected considering its recent three-year revenue growth is beating forecasts for a struggling industry. When we see a history of positive growth in a struggling industry, but only an average P/S, we assume potential risks are what might be placing pressure on the P/S ratio. Perhaps there is some hesitation about the company's ability to stay its recent course and swim against the current of the broader industry turmoil. The fact that the company's relative performance has not provided a kick to the share price suggests that some investors are anticipating revenue instability.

Before you take the next step, you should know about the 3 warning signs for Sinostar PEC Holdings (1 doesn't sit too well with us!) that we have uncovered.

It's important to make sure you look for a great company, not just the first idea you come across. So if growing profitability aligns with your idea of a great company, take a peek at this free list of interesting companies with strong recent earnings growth (and a low P/E).

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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.