Angang Steel Company Limited (HKG:347) shares have had a really impressive month, gaining 25% after a shaky period beforehand. Not all shareholders will be feeling jubilant, since the share price is still down a very disappointing 30% in the last twelve months.

In spite of the firm bounce in price, you could still be forgiven for feeling indifferent about Angang Steel's P/S ratio of 0.1x, since the median price-to-sales (or "P/S") ratio for the Metals and Mining industry in Hong Kong is also close to 0.4x. However, investors might be overlooking a clear opportunity or potential setback if there is no rational basis for the P/S.

How Angang Steel Has Been Performing

Angang Steel could be doing better as its revenue has been going backwards lately while most other companies have been seeing positive revenue growth. It might be that many expect the dour revenue performance to strengthen positively, which has kept the P/S from falling. However, if this isn't the case, investors might get caught out paying too much for the stock.

Is There Some Revenue Growth Forecasted For Angang Steel?

Angang Steel's P/S ratio would be typical for a company that's only expected to deliver moderate growth, and importantly, perform in line with the industry.

Taking a look back first, the company's revenue growth last year wasn't something to get excited about as it posted a disappointing decline of 9.9%. The last three years don't look nice either as the company has shrunk revenue by 15% in aggregate. Therefore, it's fair to say the revenue growth recently has been undesirable for the company.

Shifting to the future, estimates from the eight analysts covering the company suggest revenue growth is heading into negative territory, declining 1.2% over the next year. Meanwhile, the broader industry is forecast to expand by 14%, which paints a poor picture.

With this in consideration, we think it doesn't make sense that Angang Steel's P/S is closely matching its industry peers. Apparently many investors in the company reject the analyst cohort's pessimism and aren't willing to let go of their stock right now. Only the boldest would assume these prices are sustainable as these declining revenues are likely to weigh on the share price eventually.

The Bottom Line On Angang Steel's P/S

Angang Steel appears to be back in favour with a solid price jump bringing its P/S back in line with other companies in 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.

While Angang Steel's P/S isn't anything out of the ordinary for companies in the industry, we didn't expect it given forecasts of revenue decline. With this in mind, we don't feel the current P/S is justified as declining revenues are unlikely to support a more positive sentiment for long. If the poor revenue outlook tells us one thing, it's that these current price levels could be unsustainable.

Many other vital risk factors can be found on the company's balance sheet. You can assess many of the main risks through our free balance sheet analysis for Angang Steel with six simple checks.

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.