With a median price-to-sales (or "P/S") ratio of close to 0.5x in the Insurance industry in Hong Kong, you could be forgiven for feeling indifferent about ZhongAn Online P & C Insurance Co., Ltd.'s (HKG:6060) P/S ratio, which comes in at 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.

What Does ZhongAn Online P & C Insurance's Recent Performance Look Like?

Recent revenue growth for ZhongAn Online P & C Insurance has been in line with the industry. The P/S ratio is probably moderate because investors think this modest revenue performance will continue. Those who are bullish on ZhongAn Online P & C Insurance will be hoping that revenue performance can pick up, so that they can pick up the stock at a slightly lower valuation.

Is There Some Revenue Growth Forecasted For ZhongAn Online P & C Insurance?

ZhongAn Online P & C Insurance'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 grew revenue by an impressive 22% last year. The strong recent performance means it was also able to grow revenue by 60% in total over the last three years. So we can start by confirming that the company has done a great job of growing revenue over that time.

Turning to the outlook, the next three years should generate growth of 15% per year as estimated by the ten analysts watching the company. That's shaping up to be materially higher than the 3.2% per annum growth forecast for the broader industry.

In light of this, it's curious that ZhongAn Online P & C Insurance's P/S sits in line with the majority of other companies. It may be that most investors aren't convinced the company can achieve future growth expectations.

The Bottom Line On ZhongAn Online P & C Insurance's P/S

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.

Looking at ZhongAn Online P & C Insurance's analyst forecasts revealed that its superior revenue outlook isn't giving the boost to its P/S that we would've expected. Perhaps uncertainty in the revenue forecasts are what's keeping the P/S ratio consistent with the rest of the industry. At least the risk of a price drop looks to be subdued, but investors seem to think future revenue could see some volatility.

Plus, you should also learn about these 3 warning signs we've spotted with ZhongAn Online P & C Insurance (including 2 which don't sit too well with us).

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.