Global Strategic Group Limited (HKG:8007) shareholders are no doubt pleased to see that the share price has bounced 66% in the last month, although it is still struggling to make up recently lost ground. But the last month did very little to improve the 82% share price decline over the last year.

In spite of the firm bounce in price, it's still not a stretch to say that Global Strategic Group's price-to-sales (or "P/S") ratio of 0.1x right now seems quite "middle-of-the-road" compared to the Gas Utilities industry in Hong Kong, where the median P/S ratio is around 0.4x. 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 Global Strategic Group Has Been Performing

The revenue growth achieved at Global Strategic Group over the last year would be more than acceptable for most companies. One possibility is that the P/S is moderate because investors think this respectable revenue growth might not be enough to outperform the broader industry in the near future. 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.

Do Revenue Forecasts Match The P/S Ratio?

The only time you'd be comfortable seeing a P/S like Global Strategic Group's is when the company's growth is tracking the industry closely.

Taking a look back first, we see that the company grew revenue by an impressive 29% last year. The strong recent performance means it was also able to grow revenue by 241% 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.

This is in contrast to the rest of the industry, which is expected to grow by 4.7% over the next year, materially lower than the company's recent medium-term annualised growth rates.

With this information, we find it interesting that Global Strategic Group 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.

What Does Global Strategic Group's P/S Mean For Investors?

Its shares have lifted substantially and now Global Strategic Group's P/S is back within range of the industry median. 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.

We've established that Global Strategic Group currently trades on a lower than expected P/S since its recent three-year growth is higher than the wider industry forecast. There could be some unobserved threats to revenue preventing the P/S ratio from matching this positive performance. At least the risk of a price drop looks to be subdued if recent medium-term revenue trends continue, but investors seem to think future revenue could see some volatility.

It is also worth noting that we have found 2 warning signs for Global Strategic Group that you need to take into consideration.

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.