Duiba Group Limited (HKG:1753) shares have had a really impressive month, gaining 34% after a shaky period beforehand. Not all shareholders will be feeling jubilant, since the share price is still down a very disappointing 39% in the last twelve months.

In spite of the firm bounce in price, it's still not a stretch to say that Duiba Group's price-to-sales (or "P/S") ratio of 0.2x right now seems quite "middle-of-the-road" compared to the Interactive Media and Services industry in Hong Kong, where the median P/S ratio is around 0.6x. While this might not raise any eyebrows, if the P/S ratio is not justified investors could be missing out on a potential opportunity or ignoring looming disappointment.

What Does Duiba Group's Recent Performance Look Like?

Recent times have been quite advantageous for Duiba Group as its revenue has been rising very briskly. Perhaps the market is expecting future revenue performance to taper off, which has kept the P/S from rising. If that doesn't eventuate, then existing shareholders have reason to be feeling optimistic about the future direction of the share price.

Is There Some Revenue Growth Forecasted For Duiba Group?

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

If we review the last year of revenue growth, the company posted a terrific increase of 63%. The strong recent performance means it was also able to grow revenue by 35% in total over the last three years. Therefore, it's fair to say the revenue growth recently has been superb for the company.

It's interesting to note that the rest of the industry is similarly expected to grow by 11% over the next year, which is fairly even with the company's recent medium-term annualised growth rates.

With this in consideration, it's clear to see why Duiba Group's P/S matches up closely to its industry peers. Apparently shareholders are comfortable to simply hold on assuming the company will continue keeping a low profile.

The Key Takeaway

Duiba Group's stock has a lot of momentum behind it lately, which has brought its P/S level with the rest of the industry. Typically, we'd caution against reading too much into price-to-sales ratios when settling on investment decisions, though it can reveal plenty about what other market participants think about the company.

As we've seen, Duiba Group's three-year revenue trends seem to be contributing to its P/S, given they look similar to current industry expectations. Right now shareholders are comfortable with the P/S as they are quite confident future revenue won't throw up any surprises. If recent medium-term revenue trends continue, it's hard to see the share price moving strongly in either direction in the near future under these circumstances.

You should always think about risks. Case in point, we've spotted 2 warning signs for Duiba Group you should be aware of, and 1 of them is concerning.

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.