The Omnijoi Media Corporation (SZSE:300528) share price has done very well over the last month, posting an excellent gain of 34%. Not all shareholders will be feeling jubilant, since the share price is still down a very disappointing 21% in the last twelve months.

Even after such a large jump in price, Omnijoi Media may still be sending bullish signals at the moment with its price-to-sales (or "P/S") ratio of 3.2x, since almost half of all companies in the Entertainment industry in China have P/S ratios greater than 5.6x and even P/S higher than 11x are not unusual. However, the P/S might be low for a reason and it requires further investigation to determine if it's justified.

How Omnijoi Media Has Been Performing

Revenue has risen firmly for Omnijoi Media recently, which is pleasing to see. Perhaps the market is expecting this acceptable revenue performance to take a dive, which has kept the P/S suppressed. Those who are bullish on Omnijoi Media will be hoping that this isn't the case, so that they can pick up the stock at a lower valuation.

What Are Revenue Growth Metrics Telling Us About The Low P/S?

The only time you'd be truly comfortable seeing a P/S as low as Omnijoi Media's is when the company's growth is on track to lag the industry.

If we review the last year of revenue growth, the company posted a terrific increase of 26%. As a result, it also grew revenue by 9.8% 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 that to the industry, which is predicted to deliver 28% growth in the next 12 months, the company's momentum is weaker, based on recent medium-term annualised revenue results.

With this information, we can see why Omnijoi Media is trading at a P/S lower than the industry. It seems most investors are expecting to see the recent limited growth rates continue into the future and are only willing to pay a reduced amount for the stock.

The Key Takeaway

Omnijoi Media's stock price has surged recently, but its but its P/S still remains modest. Generally, our preference is to limit the use of the price-to-sales ratio to establishing what the market thinks about the overall health of a company.

In line with expectations, Omnijoi Media maintains its low P/S on the weakness of its recent three-year growth being lower than the wider industry forecast. At this stage investors feel the potential for an improvement in revenue isn't great enough to justify a higher P/S ratio. If recent medium-term revenue trends continue, it's hard to see the share price experience a reversal of fortunes anytime soon.

It is also worth noting that we have found 1 warning sign for Omnijoi Media that you need to take into consideration.

Of course, profitable companies with a history of great earnings growth are generally safer bets. So you may wish to see this free collection of other companies that have reasonable P/E ratios and have grown earnings strongly.

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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.