Xiabuxiabu Catering Management (China) Holdings Co., Ltd. (HKG:520) shareholders that were waiting for something to happen have been dealt a blow with a 26% share price drop in the last month. The recent drop completes a disastrous twelve months for shareholders, who are sitting on a 70% loss during that time.

Since its price has dipped substantially, given about half the companies operating in Hong Kong's Hospitality industry have price-to-sales ratios (or "P/S") above 1x, you may consider Xiabuxiabu Catering Management (China) Holdings as an attractive investment with its 0.4x P/S ratio. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's limited.

Check out our latest analysis for Xiabuxiabu Catering Management (China) Holdings

What Does Xiabuxiabu Catering Management (China) Holdings' P/S Mean For Shareholders?

Recent times haven't been great for Xiabuxiabu Catering Management (China) Holdings as its revenue has been rising slower than most other companies. Perhaps the market is expecting the current trend of poor revenue growth to continue, which has kept the P/S suppressed. If you still like the company, you'd be hoping revenue doesn't get any worse and that you could pick up some stock while it's out of favour.

How Is Xiabuxiabu Catering Management (China) Holdings' Revenue Growth Trending?

Xiabuxiabu Catering Management (China) Holdings' P/S ratio would be typical for a company that's only expected to deliver limited growth, and importantly, perform worse than the industry.

If we review the last year of revenue growth, the company posted a worthy increase of 3.0%. Although, the latest three year period in total hasn't been as good as it didn't manage to provide any growth at all. So it appears to us that the company has had a mixed result in terms of growing revenue over that time.

Shifting to the future, estimates from the analysts covering the company suggest revenue should grow by 21% each year over the next three years. That's shaping up to be materially lower than the 25% per annum growth forecast for the broader industry.

With this in consideration, its clear as to why Xiabuxiabu Catering Management (China) Holdings' P/S is falling short industry peers. Apparently many shareholders weren't comfortable holding on while the company is potentially eyeing a less prosperous future.

What We Can Learn From Xiabuxiabu Catering Management (China) Holdings' P/S?

The southerly movements of Xiabuxiabu Catering Management (China) Holdings' shares means its P/S is now sitting at a pretty low level. 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.

As expected, our analysis of Xiabuxiabu Catering Management (China) Holdings' analyst forecasts confirms that the company's underwhelming revenue outlook is a major contributor to its low P/S. Right now shareholders are accepting the low P/S as they concede future revenue probably won't provide any pleasant surprises. The company will need a change of fortune to justify the P/S rising higher in the future.

Many other vital risk factors can be found on the company's balance sheet. Take a look at our free balance sheet analysis for Xiabuxiabu Catering Management (China) Holdings with six simple checks on some of these key factors.

If you're unsure about the strength of Xiabuxiabu Catering Management (China) Holdings' business, why not explore our interactive list of stocks with solid business fundamentals for some other companies you may have missed.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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.