You may think that with a price-to-sales (or "P/S") ratio of 1x Guangxi Rural Investment Sugar Industry Group Co., Ltd (SZSE:000911) is a stock worth checking out, seeing as almost half of all the Food companies in China have P/S ratios greater than 1.9x and even P/S higher than 4x aren't out of the ordinary. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the reduced P/S.

How Guangxi Rural Investment Sugar Industry Group Has Been Performing

The revenue growth achieved at Guangxi Rural Investment Sugar Industry Group over the last year would be more than acceptable for most companies. 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 Guangxi Rural Investment Sugar Industry Group will be hoping that this isn't the case, so that they can pick up the stock at a lower valuation.

Do Revenue Forecasts Match The Low P/S Ratio?

The only time you'd be truly comfortable seeing a P/S as low as Guangxi Rural Investment Sugar Industry Group's is when the company's growth is on track to lag the industry.

Taking a look back first, we see that the company grew revenue by an impressive 22% last year. The latest three year period has also seen a 27% overall rise in revenue, aided extensively by its short-term performance. So we can start by confirming that the company has actually done a good job of growing revenue over that time.

Comparing the recent medium-term revenue trends against the industry's one-year growth forecast of 16% shows it's noticeably less attractive.

With this information, we can see why Guangxi Rural Investment Sugar Industry Group 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.

What Does Guangxi Rural Investment Sugar Industry Group's P/S Mean For Investors?

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.

In line with expectations, Guangxi Rural Investment Sugar Industry Group 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.

Having said that, be aware Guangxi Rural Investment Sugar Industry Group is showing 1 warning sign in our investment analysis, you should know about.

If these risks are making you reconsider your opinion on Guangxi Rural Investment Sugar Industry Group, 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.