The Worldgate Global Logistics Ltd (HKG:8292) share price has fared very poorly over the last month, falling by a substantial 25%. The recent drop completes a disastrous twelve months for shareholders, who are sitting on a 65% loss during that time.

Even after such a large drop in price, you could still be forgiven for feeling indifferent about Worldgate Global Logistics' P/S ratio of 0.2x, since the median price-to-sales (or "P/S") ratio for the Logistics industry in Hong Kong 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.

How Has Worldgate Global Logistics Performed Recently?

As an illustration, revenue has deteriorated at Worldgate Global Logistics over the last year, which is not ideal at all. It might be that many expect the company to put the disappointing revenue performance behind them over the coming period, which has kept the P/S from falling. If you like the company, you'd at least be hoping this is the case so that you could potentially pick up some stock while it's not quite in favour.

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

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

Retrospectively, the last year delivered a frustrating 14% decrease to the company's top line. However, a few very strong years before that means that it was still able to grow revenue by an impressive 69% in total over the last three years. Accordingly, while they would have preferred to keep the run going, shareholders would definitely welcome the medium-term rates of revenue growth.

Comparing that recent medium-term revenue trajectory with the industry's one-year growth forecast of 14% shows it's noticeably more attractive.

With this information, we find it interesting that Worldgate Global Logistics is trading at a fairly similar P/S compared to the industry. Apparently some shareholders believe the recent performance is at its limits and have been accepting lower selling prices.

The Bottom Line On Worldgate Global Logistics' P/S

With its share price dropping off a cliff, the P/S for Worldgate Global Logistics looks to be in line with the rest of the Logistics industry. We'd say the price-to-sales ratio's power isn't primarily as a valuation instrument but rather to gauge current investor sentiment and future expectations.

To our surprise, Worldgate Global Logistics 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. While recent revenue trends over the past medium-term suggest that the risk of a price decline is low, investors appear to see the likelihood of revenue fluctuations in the future.

Before you settle on your opinion, we've discovered 2 warning signs for Worldgate Global Logistics that you should be aware of.

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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