To the annoyance of some shareholders, China Demeter Financial Investments Limited (HKG:8120) shares are down a considerable 45% in the last month, which continues a horrid run for the company. For any long-term shareholders, the last month ends a year to forget by locking in a 61% share price decline.

After such a large drop in price, when close to half the companies operating in Hong Kong's Hospitality industry have price-to-sales ratios (or "P/S") above 0.9x, you may consider China Demeter Financial Investments as an enticing stock to check out with its 0.3x P/S ratio. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the reduced P/S.

What Does China Demeter Financial Investments' Recent Performance Look Like?

Revenue has risen firmly for China Demeter Financial Investments recently, which is pleasing to see. It might be that many expect the respectable revenue performance to degrade substantially, which has repressed the P/S. Those who are bullish on China Demeter Financial Investments will be hoping that this isn't the case, so that they can pick up the stock at a lower valuation.

How Is China Demeter Financial Investments' Revenue Growth Trending?

In order to justify its P/S ratio, China Demeter Financial Investments would need to produce sluggish growth that's trailing the industry.

Taking a look back first, we see that the company managed to grow revenues by a handy 11% last year. The solid recent performance means it was also able to grow revenue by 15% in total over the last three years. So we can start by confirming that the company has actually done a good job of growing revenue over that time.

Comparing the recent medium-term revenue trends against the industry's one-year growth forecast of 19% shows it's noticeably less attractive.

In light of this, it's understandable that China Demeter Financial Investments' P/S sits below the majority of other companies. Apparently many shareholders weren't comfortable holding on to something they believe will continue to trail the wider industry.

What Does China Demeter Financial Investments' P/S Mean For Investors?

The southerly movements of China Demeter Financial Investments' shares means its P/S is now sitting at a pretty low level. 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 examination of China Demeter Financial Investments confirms that the company's revenue trends over the past three-year years are a key factor in its low price-to-sales ratio, as we suspected, given they fall short of current industry expectations. Right now shareholders are accepting the low P/S as they concede future revenue probably won't provide any pleasant surprises. Unless the recent medium-term conditions improve, they will continue to form a barrier for the share price around these levels.

There are also other vital risk factors to consider and we've discovered 2 warning signs for China Demeter Financial Investments (1 doesn't sit too well with us!) that you should be aware of before investing here.

If companies with solid past earnings growth is up your alley, you may wish to see this free collection of other companies with strong earnings growth and low P/E ratios.

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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.