Those holding China New Consumption Group Limited (HKG:8275) shares would be relieved that the share price has rebounded 26% in the last thirty days, but it needs to keep going to repair the recent damage it has caused to investor portfolios. But the gains over the last month weren't enough to make shareholders whole, as the share price is still down 9.4% in the last twelve months.

In spite of the firm bounce in price, you could still be forgiven for feeling indifferent about China New Consumption Group's P/S ratio of 0.7x, since the median price-to-sales (or "P/S") ratio for the Construction industry in Hong Kong is also close to 0.3x. 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.

Check out our latest analysis for China New Consumption Group

What Does China New Consumption Group's P/S Mean For Shareholders?

The recent revenue growth at China New Consumption Group would have to be considered satisfactory if not spectacular. It might be that many expect the respectable revenue performance to only match most other companies over the coming period, which has kept the P/S from rising. If not, then at least existing shareholders probably aren't too pessimistic about the future direction of the share price.

Is There Some Revenue Growth Forecasted For China New Consumption Group?

In order to justify its P/S ratio, China New Consumption Group would need to produce growth that's similar to the industry.

If we review the last year of revenue growth, the company posted a worthy increase of 3.0%. Pleasingly, revenue has also lifted 42% 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.

It's interesting to note that the rest of the industry is similarly expected to grow by 12% over the next year, which is fairly even with the company's recent medium-term annualised growth rates.

With this in consideration, it's clear to see why China New Consumption Group's P/S matches up closely to its industry peers. It seems most investors are expecting to see average growth rates continue into the future and are only willing to pay a moderate amount for the stock.

The Bottom Line On China New Consumption Group's P/S

China New Consumption Group appears to be back in favour with a solid price jump bringing its P/S back in line with other companies in the industry 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've seen, China New Consumption Group's three-year revenue trends seem to be contributing to its P/S, given they look similar to current industry expectations. Right now shareholders are comfortable with the P/S as they are quite confident future revenue won't throw up any surprises. Unless the recent medium-term conditions change, they will continue to support the share price at these levels.

Before you settle on your opinion, we've discovered 5 warning signs for China New Consumption Group (3 make us uncomfortable!) that you should be aware of.

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.