Huafu Fashion Co., Ltd. (SZSE:002042) shares have continued their recent momentum with a 26% gain in the last month alone. Unfortunately, despite the strong performance over the last month, the full year gain of 6.9% isn't as attractive.

In spite of the firm bounce in price, Huafu Fashion's price-to-sales (or "P/S") ratio of 0.6x might still make it look like a buy right now compared to the Luxury industry in China, where around half of the companies have P/S ratios above 1.6x and even P/S above 4x are quite common. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's limited.

What Does Huafu Fashion's Recent Performance Look Like?

Huafu Fashion hasn't been tracking well recently as its declining revenue compares poorly to other companies, which have seen some growth in their revenues on average. Perhaps the P/S remains low as investors think the prospects of strong revenue growth aren't on the horizon. If this is the case, then existing shareholders will probably struggle to get excited about the future direction of the share price.

Is There Any Revenue Growth Forecasted For Huafu Fashion?

Huafu Fashion's P/S ratio would be typical for a company that's only expected to deliver limited growth, and importantly, perform worse than the industry.

Retrospectively, the last year delivered a frustrating 2.2% decrease to the company's top line. The last three years don't look nice either as the company has shrunk revenue by 35% in aggregate. Accordingly, shareholders would have felt downbeat about the medium-term rates of revenue growth.

Turning to the outlook, the next year should generate growth of 17% as estimated by the four analysts watching the company. With the industry predicted to deliver 15% growth , the company is positioned for a comparable revenue result.

In light of this, it's peculiar that Huafu Fashion's P/S sits below the majority of other companies. It may be that most investors are not convinced the company can achieve future growth expectations.

The Bottom Line On Huafu Fashion's P/S

Despite Huafu Fashion's share price climbing recently, its P/S still lags most other companies. It's argued the price-to-sales ratio is an inferior measure of value within certain industries, but it can be a powerful business sentiment indicator.

It looks to us like the P/S figures for Huafu Fashion remain low despite growth that is expected to be in line with other companies in the industry. When we see middle-of-the-road revenue growth like this, we assume it must be the potential risks that are what is placing pressure on the P/S ratio. However, if you agree with the analysts' forecasts, you may be able to pick up the stock at an attractive price.

Plus, you should also learn about these 2 warning signs we've spotted with Huafu Fashion (including 1 which shouldn't be ignored).

If you're unsure about the strength of Huafu Fashion's 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.