C&N Holdings Limited (HKG:8430) shares have had a horrible month, losing 39% after a relatively good period beforehand. The recent drop completes a disastrous twelve months for shareholders, who are sitting on a 61% loss during that time.

Since its price has dipped substantially, given about half the companies operating in Hong Kong's Transportation industry have price-to-sales ratios (or "P/S") above 0.7x, you may consider C&N Holdings as an attractive investment with its 0.1x P/S ratio. However, the P/S might be low for a reason and it requires further investigation to determine if it's justified.

How Has C&N Holdings Performed Recently?

C&N Holdings has been doing a good job lately as it's been growing revenue at a solid pace. Perhaps the market is expecting this acceptable revenue performance to take a dive, which has kept the P/S suppressed. If you like the company, you'd be hoping this isn't the case so that you could potentially pick up some stock while it's out of favour.

Do Revenue Forecasts Match The Low P/S Ratio?

The only time you'd be truly comfortable seeing a P/S as low as C&N Holdings' 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 18%. Still, revenue has barely risen at all from three years ago in total, which is not ideal. Therefore, it's fair to say that revenue growth has been inconsistent recently for the company.

Comparing that to the industry, which is predicted to deliver 6.5% growth in the next 12 months, the company's momentum is weaker, based on recent medium-term annualised revenue results.

With this in consideration, it's easy to understand why C&N Holdings' P/S falls short of the mark set by its industry peers. 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 Bottom Line On C&N Holdings' P/S

C&N Holdings' P/S has taken a dip along with its share price. 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.

Our examination of C&N Holdings 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. If recent medium-term revenue trends continue, it's hard to see the share price experience a reversal of fortunes anytime soon.

Don't forget that there may be other risks. For instance, we've identified 4 warning signs for C&N Holdings that you should be aware of.

If these risks are making you reconsider your opinion on C&N Holdings, explore our interactive list of high quality stocks to get an idea of what else is out there.

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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.