The Cultural Investment Holdings Co.,Ltd (SHSE:600715) share price has done very well over the last month, posting an excellent gain of 61%. The last 30 days bring the annual gain to a very sharp 50%.

In spite of the firm bounce in price, it's still not a stretch to say that Cultural Investment HoldingsLtd's price-to-sales (or "P/S") ratio of 9.8x right now seems quite "middle-of-the-road" compared to the Entertainment industry in China, where the median P/S ratio is around 9.2x. 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.

View our latest analysis for Cultural Investment HoldingsLtd

What Does Cultural Investment HoldingsLtd's Recent Performance Look Like?

For instance, Cultural Investment HoldingsLtd's receding revenue in recent times would have to be some food for thought. It might be that many expect the company to put the disappointing revenue performance behind them over the coming period, which has kept the P/S from falling. If not, then existing shareholders may be a little nervous about the viability of the share price.

Is There Some Revenue Growth Forecasted For Cultural Investment HoldingsLtd?

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

Taking a look back first, the company's revenue growth last year wasn't something to get excited about as it posted a disappointing decline of 14%. The last three years don't look nice either as the company has shrunk revenue by 35% in aggregate. So unfortunately, we have to acknowledge that the company has not done a great job of growing revenue over that time.

Weighing that medium-term revenue trajectory against the broader industry's one-year forecast for expansion of 35% shows it's an unpleasant look.

In light of this, it's somewhat alarming that Cultural Investment HoldingsLtd's P/S sits in line with the majority of other companies. It seems most investors are ignoring the recent poor growth rate and are hoping for a turnaround in the company's business prospects. 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 Bottom Line On Cultural Investment HoldingsLtd's P/S

Cultural Investment HoldingsLtd appears to be back in favour with a solid price jump bringing its P/S back in line with other companies in the industry 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.

We find it unexpected that Cultural Investment HoldingsLtd trades at a P/S ratio that is comparable to the rest of the industry, despite experiencing declining revenues during the medium-term, while the industry as a whole is expected 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. Unless the recent medium-term conditions improve markedly, investors will have a hard time accepting the share price as fair value.

Having said that, be aware Cultural Investment HoldingsLtd is showing 2 warning signs in our investment analysis, you should know about.

If these risks are making you reconsider your opinion on Cultural Investment HoldingsLtd, 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.