Shi Shi Services Limited (HKG:8181) shares have had a really impressive month, gaining 31% 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 39% over that time.

Even after such a large jump in price, Shi Shi Services' price-to-sales (or "P/S") ratio of 0.1x might still make it look like a buy right now compared to the Consumer Services industry in Hong Kong, where around half of the companies have P/S ratios above 1.2x and even P/S above 4x are quite common. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the reduced P/S.

Check out our latest analysis for Shi Shi Services

How Has Shi Shi Services Performed Recently?

Revenue has risen at a steady rate over the last year for Shi Shi Services, which is generally not a bad outcome. Perhaps the market believes the recent revenue performance might fall short of industry figures in the near future, leading to a reduced P/S. 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 out of favour.

Do Revenue Forecasts Match The Low P/S Ratio?

The only time you'd be truly comfortable seeing a P/S as low as Shi Shi Services' is when the company's growth is on track to lag the industry.

If we review the last year of revenue growth, the company posted a worthy increase of 5.2%. The latest three year period has also seen a 13% overall rise in revenue, aided somewhat by its short-term performance. Therefore, it's fair to say the revenue growth recently has been respectable for the company.

This is in contrast to the rest of the industry, which is expected to grow by 21% over the next year, materially higher than the company's recent medium-term annualised growth rates.

In light of this, it's understandable that Shi Shi Services' P/S sits below the majority of other companies. Apparently many shareholders weren't comfortable holding on to something they believe will continue to trail the wider industry.

What We Can Learn From Shi Shi Services' P/S?

Shi Shi Services' stock price has surged recently, but its but its P/S still remains modest. 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.

In line with expectations, Shi Shi Services maintains its low P/S on the weakness of its recent three-year growth being lower than the wider industry forecast. Right now shareholders are accepting the low P/S as they concede future revenue probably won't provide any pleasant surprises. Unless the recent medium-term conditions improve, they will continue to form a barrier for the share price around these levels.

Plus, you should also learn about these 3 warning signs we've spotted with Shi Shi Services (including 2 which are significant).

If strong companies turning a profit tickle your fancy, then you'll want to check out this free list of interesting companies that trade on a low P/E (but have proven they can grow earnings).

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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.