Adtiger Corporations Limited (HKG:1163) shares have had a really impressive month, gaining 40% after a shaky period beforehand. Not all shareholders will be feeling jubilant, since the share price is still down a very disappointing 10% in the last twelve months.

Although its price has surged higher, it's still not a stretch to say that Adtiger Corporations' price-to-sales (or "P/S") ratio of 0.4x right now seems quite "middle-of-the-road" compared to the Media industry in Hong Kong, where the median P/S ratio is around 0.8x. 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.

How Adtiger Corporations Has Been Performing

For example, consider that Adtiger Corporations' financial performance has been poor lately as its revenue has been in decline. Perhaps investors believe the recent revenue performance is enough to keep in line with the industry, which is keeping the P/S from dropping off. If you like the company, you'd at least be hoping this is the case so that you could potentially pick up some stock while it's not quite in favour.

How Is Adtiger Corporations' Revenue Growth Trending?

There's an inherent assumption that a company should be matching the industry for P/S ratios like Adtiger Corporations' to be considered reasonable.

Retrospectively, the last year delivered a frustrating 23% decrease to the company's top line. This has soured the latest three-year period, which nevertheless managed to deliver a decent 11% overall rise in revenue. Although it's been a bumpy ride, it's still fair to say the revenue growth recently has been mostly respectable for the company.

Comparing the recent medium-term revenue trends against the industry's one-year growth forecast of 5.7% shows it's noticeably less attractive.

With this in mind, we find it intriguing that Adtiger Corporations' P/S is comparable to that of its industry peers. It seems most investors are ignoring the fairly limited recent growth rates and are willing to pay up for exposure to the stock. Maintaining these prices will be difficult to achieve as a continuation of recent revenue trends is likely to weigh down the shares eventually.

The Bottom Line On Adtiger Corporations' P/S

Its shares have lifted substantially and now Adtiger Corporations' P/S is back within range of the industry median. Using the price-to-sales ratio alone to determine if you should sell your stock isn't sensible, however it can be a practical guide to the company's future prospects.

Our examination of Adtiger Corporations revealed its poor three-year revenue trends aren't resulting in a lower P/S as per our expectations, given they look worse than current industry outlook. When we see weak revenue with slower than industry growth, we suspect the share price is at risk of declining, bringing the P/S back in line with expectations. Unless there is a significant improvement in the company's medium-term performance, it will be difficult to prevent the P/S ratio from declining to a more reasonable level.

There are also other vital risk factors to consider and we've discovered 2 warning signs for Adtiger Corporations (1 is a bit unpleasant!) that you should be aware of before investing here.

If you're unsure about the strength of Adtiger Corporations' business, why not explore our interactive list of stocks with solid business fundamentals for some other companies you may have missed.

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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.