Pan Asia Data Holdings Inc. (HKG:1561) shares have had a horrible month, losing 34% after a relatively good period beforehand. The recent drop completes a disastrous twelve months for shareholders, who are sitting on a 90% loss during that time.

Even after such a large drop in price, there still wouldn't be many who think Pan Asia Data Holdings' price-to-sales (or "P/S") ratio of 0.1x is worth a mention when the median P/S in Hong Kong's Chemicals 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.

What Does Pan Asia Data Holdings' Recent Performance Look Like?

The revenue growth achieved at Pan Asia Data Holdings over the last year would be more than acceptable for most companies. It might be that many expect the respectable revenue performance to wane, which has kept the P/S from rising. 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.

How Is Pan Asia Data Holdings' Revenue Growth Trending?

The only time you'd be comfortable seeing a P/S like Pan Asia Data Holdings' is when the company's growth is tracking the industry closely.

Retrospectively, the last year delivered a decent 10% gain to the company's revenues. Still, revenue has barely risen at all in aggregate from three years ago, which is not ideal. Accordingly, shareholders probably wouldn't have been overly satisfied with the unstable medium-term growth rates.

Weighing that medium-term revenue trajectory against the broader industry's one-year forecast for expansion of 3.3% shows it's an unpleasant look.

With this information, we find it concerning that Pan Asia Data Holdings is trading at a fairly similar P/S compared to the industry. Apparently many investors in the company are way less bearish than recent times would indicate and aren't willing to let go of their stock right now. 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.

What We Can Learn From Pan Asia Data Holdings' P/S?

Pan Asia Data Holdings' plummeting stock price has brought its P/S back to a similar region as the rest of 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.

Our look at Pan Asia Data Holdings revealed its shrinking revenues over the medium-term haven't impacted the P/S as much as we anticipated, given the industry is set 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 the circumstances surrounding the recent medium-term improve, it wouldn't be wrong to expect a a difficult period ahead for the company's shareholders.

It's always necessary to consider the ever-present spectre of investment risk. We've identified 5 warning signs with Pan Asia Data Holdings (at least 1 which shouldn't be ignored), and understanding them should be part of your investment process.

If you're unsure about the strength of Pan Asia Data Holdings' business, why not explore our interactive list of stocks with solid business fundamentals for some other companies you may have missed.

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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.