Blue Moon Group Holdings Limited (HKG:6993) shares have had a really impressive month, gaining 27% after a shaky period beforehand. Unfortunately, the gains of the last month did little to right the losses of the last year with the stock still down 18% over that time.

Following the firm bounce in price, you could be forgiven for thinking Blue Moon Group Holdings is a stock not worth researching with a price-to-sales ratios (or "P/S") of 1.6x, considering almost half the companies in Hong Kong's Household Products industry have P/S ratios below 0.5x. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's as high as it is.

What Does Blue Moon Group Holdings' Recent Performance Look Like?

Recent revenue growth for Blue Moon Group Holdings has been in line with the industry. One possibility is that the P/S ratio is high because investors think this modest revenue performance will accelerate. You'd really hope so, otherwise you're paying a pretty hefty price for no particular reason.

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

The only time you'd be truly comfortable seeing a P/S as high as Blue Moon Group Holdings' is when the company's growth is on track to outshine the industry.

Taking a look back first, we see that the company managed to grow revenues by a handy 13% last year. The solid recent performance means it was also able to grow revenue by 19% in total over the last three years. Therefore, it's fair to say the revenue growth recently has been respectable for the company.

Shifting to the future, estimates from the six analysts covering the company suggest revenue should grow by 7.9% per year over the next three years. Meanwhile, the rest of the industry is forecast to only expand by 5.1% each year, which is noticeably less attractive.

In light of this, it's understandable that Blue Moon Group Holdings' P/S sits above the majority of other companies. Apparently shareholders aren't keen to offload something that is potentially eyeing a more prosperous future.

What Does Blue Moon Group Holdings' P/S Mean For Investors?

Blue Moon Group Holdings' P/S is on the rise since its shares have risen strongly. While the price-to-sales ratio shouldn't be the defining factor in whether you buy a stock or not, it's quite a capable barometer of revenue expectations.

As we suspected, our examination of Blue Moon Group Holdings' analyst forecasts revealed that its superior revenue outlook is contributing to its high P/S. It appears that shareholders are confident in the company's future revenues, which is propping up the P/S. Unless these conditions change, they will continue to provide strong support to the share price.

Many other vital risk factors can be found on the company's balance sheet. You can assess many of the main risks through our free balance sheet analysis for Blue Moon Group Holdings with six simple checks.

If these risks are making you reconsider your opinion on Blue Moon Group Holdings, explore our interactive list of high quality stocks to get an idea of what else is out there.

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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.