To the annoyance of some shareholders, BGMC International Limited (HKG:1693) shares are down a considerable 26% in the last month, which continues a horrid run for the company. The drop over the last 30 days has capped off a tough year for shareholders, with the share price down 45% in that time.

Although its price has dipped substantially, there still wouldn't be many who think BGMC International's price-to-sales (or "P/S") ratio of 0.3x is worth a mention when the median P/S in Hong Kong's Construction industry is similar at about 0.2x. 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.

What Does BGMC International's Recent Performance Look Like?

The recent revenue growth at BGMC International would have to be considered satisfactory if not spectacular. Perhaps the expectation moving forward is that the revenue growth will track in line with the wider industry for the near term, which has kept the P/S subdued. 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 BGMC International?

BGMC International's P/S ratio would be typical for a company that's only expected to deliver moderate growth, and importantly, perform in line with the industry.

Taking a look back first, we see that the company managed to grow revenues by a handy 6.3% last year. However, this wasn't enough as the latest three year period has seen an unpleasant 63% overall drop in revenue. Accordingly, shareholders would have felt downbeat about the medium-term rates of revenue growth.

In contrast to the company, the rest of the industry is expected to grow by 10% over the next year, which really puts the company's recent medium-term revenue decline into perspective.

In light of this, it's somewhat alarming that BGMC International's P/S sits in line with the majority of other companies. Apparently many investors in the company are way less bearish than recent times would indicate and aren't willing to let go of their stock right now. There's a good chance existing shareholders are setting themselves up for future disappointment if the P/S falls to levels more in line with the recent negative growth rates.

The Final Word

With its share price dropping off a cliff, the P/S for BGMC International looks to be in line with the rest of the Construction 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.

The fact that BGMC International currently trades at a P/S on par with the rest of the industry is surprising to us since its recent revenues have been in decline over the medium-term, all while the industry is set to grow. When we see revenue heading backwards in the context of growing industry forecasts, it'd make sense to expect a possible share price decline on the horizon, sending the moderate P/S lower. If recent medium-term revenue trends continue, it will place shareholders' investments at risk and potential investors in danger of paying an unnecessary premium.

You always need to take note of risks, for example - BGMC International has 2 warning signs we think you should be aware of.

If you're unsure about the strength of BGMC International'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.