The Jiande International Holdings Limited (HKG:865) share price has done very well over the last month, posting an excellent gain of 32%. The bad news is that even after the stocks recovery in the last 30 days, shareholders are still underwater by about 7.4% over the last year.

Even after such a large jump in price, it's still not a stretch to say that Jiande International Holdings' price-to-sales (or "P/S") ratio of 0.4x right now seems quite "middle-of-the-road" compared to the Real Estate industry in Hong Kong, where the median P/S ratio is around 0.7x. Although, it's not wise to simply ignore the P/S without explanation as investors may be disregarding a distinct opportunity or a costly mistake.

How Jiande International Holdings Has Been Performing

Jiande International Holdings certainly has been doing a great job lately as it's been growing its revenue at a really rapid pace. Perhaps the market is expecting future revenue performance to taper off, which has kept the P/S from rising. Those who are bullish on Jiande International Holdings 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 P/S?

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

Retrospectively, the last year delivered an explosive gain to the company's top line. Pleasingly, revenue has also lifted 283% in aggregate from three years ago, thanks to the last 12 months of explosive growth. Accordingly, shareholders would have definitely welcomed those medium-term rates of revenue growth.

This is in contrast to the rest of the industry, which is expected to grow by 4.9% over the next year, materially lower than the company's recent medium-term annualised growth rates.

In light of this, it's curious that Jiande International Holdings' P/S sits in line with the majority of other companies. It may be that most investors are not convinced the company can maintain its recent growth rates.

The Key Takeaway

Its shares have lifted substantially and now Jiande International Holdings' P/S is back within range of the industry median. 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.

To our surprise, Jiande International Holdings revealed its three-year revenue trends aren't contributing to its P/S as much as we would have predicted, given they look better than current industry expectations. It'd be fair to assume that potential risks the company faces could be the contributing factor to the lower than expected P/S. While recent revenue trends over the past medium-term suggest that the risk of a price decline is low, investors appear to see the likelihood of revenue fluctuations in the future.

Before you settle on your opinion, we've discovered 2 warning signs for Jiande International Holdings that you should be aware of.

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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