To the annoyance of some shareholders, Sino-Ocean Service Holding Limited (HKG:6677) shares are down a considerable 35% in the last month, which continues a horrid run for the company. The recent drop completes a disastrous twelve months for shareholders, who are sitting on a 82% loss during that time.

In spite of the heavy fall in price, there still wouldn't be many who think Sino-Ocean Service Holding's price-to-sales (or "P/S") ratio of 0.2x is worth a mention when the median P/S in Hong Kong's Commercial Services industry is similar at about 0.4x. However, investors might be overlooking a clear opportunity or potential setback if there is no rational basis for the P/S.

View our latest analysis for Sino-Ocean Service Holding

How Has Sino-Ocean Service Holding Performed Recently?

The recently shrinking revenue for Sino-Ocean Service Holding has been in line with the industry. It seems that few are expecting the company's revenue performance to deviate much from most other companies, which has held the P/S back. If you still like the company, you'd want its revenue trajectory to turn around before making any decisions. In saying that, existing shareholders probably aren't too pessimistic about the share price if the company's revenue continues tracking the industry.

Is There Some Revenue Growth Forecasted For Sino-Ocean Service Holding?

There's an inherent assumption that a company should be matching the industry for P/S ratios like Sino-Ocean Service Holding's to be considered reasonable.

Retrospectively, the last year delivered virtually the same number to the company's top line as the year before. Still, the latest three year period has seen an excellent 70% overall rise in revenue, in spite of its uninspiring short-term performance. Accordingly, shareholders will be pleased, but also have some questions to ponder about the last 12 months.

Looking ahead now, revenue is anticipated to slump, contracting by 5.0% during the coming year according to the sole analyst following the company. With the industry predicted to deliver 7.6% growth, that's a disappointing outcome.

In light of this, it's somewhat alarming that Sino-Ocean Service Holding's P/S sits in line with the majority of other companies. It seems most investors are hoping for a turnaround in the company's business prospects, but the analyst cohort is not so confident this will happen. Only the boldest would assume these prices are sustainable as these declining revenues are likely to weigh on the share price eventually.

What We Can Learn From Sino-Ocean Service Holding's P/S?

With its share price dropping off a cliff, the P/S for Sino-Ocean Service Holding looks to be in line with the rest of the Commercial Services industry. 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.

It appears that Sino-Ocean Service Holding currently trades on a higher than expected P/S for a company whose revenues are forecast to decline. When we see a gloomy outlook like this, our immediate thoughts are that the share price is at risk of declining, negatively impacting P/S. If the poor revenue outlook tells us one thing, it's that these current price levels could be unsustainable.

Before you settle on your opinion, we've discovered 2 warning signs for Sino-Ocean Service Holding (1 is potentially serious!) that you should be aware of.

If these risks are making you reconsider your opinion on Sino-Ocean Service Holding, 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.