Xiamen Comfort Science&Technology Group Co., Ltd (SZSE:002614) shares have continued their recent momentum with a 25% gain in the last month alone. Unfortunately, despite the strong performance over the last month, the full year gain of 3.8% isn't as attractive.

In spite of the firm bounce in price, Xiamen Comfort Science&Technology Group's price-to-sales (or "P/S") ratio of 1x might still make it look like a strong buy right now compared to the wider Leisure industry in China, where around half of the companies have P/S ratios above 3.7x and even P/S above 6x are quite common. However, the P/S might be quite low for a reason and it requires further investigation to determine if it's justified.

What Does Xiamen Comfort Science&Technology Group's P/S Mean For Shareholders?

While the industry has experienced revenue growth lately, Xiamen Comfort Science&Technology Group's revenue has gone into reverse gear, which is not great. The P/S ratio is probably low because investors think this poor revenue performance isn't going to get any better. If this is the case, then existing shareholders will probably struggle to get excited about the future direction of the share price.

What Are Revenue Growth Metrics Telling Us About The Low P/S?

The only time you'd be truly comfortable seeing a P/S as depressed as Xiamen Comfort Science&Technology Group's is when the company's growth is on track to lag the industry decidedly.

Taking a look back first, the company's revenue growth last year wasn't something to get excited about as it posted a disappointing decline of 7.2%. The last three years don't look nice either as the company has shrunk revenue by 42% in aggregate. Therefore, it's fair to say the revenue growth recently has been undesirable for the company.

Shifting to the future, estimates from the three analysts covering the company suggest revenue should grow by 7.3% over the next year. With the industry predicted to deliver 22% growth, the company is positioned for a weaker revenue result.

With this in consideration, its clear as to why Xiamen Comfort Science&Technology Group's P/S is falling short industry peers. Apparently many shareholders weren't comfortable holding on while the company is potentially eyeing a less prosperous future.

What Does Xiamen Comfort Science&Technology Group's P/S Mean For Investors?

Shares in Xiamen Comfort Science&Technology Group have risen appreciably however, its P/S is still subdued. Generally, our preference is to limit the use of the price-to-sales ratio to establishing what the market thinks about the overall health of a company.

We've established that Xiamen Comfort Science&Technology Group maintains its low P/S on the weakness of its forecast growth being lower than the wider industry, as expected. At this stage investors feel the potential for an improvement in revenue isn't great enough to justify a higher P/S ratio. It's hard to see the share price rising strongly in the near future under these circumstances.

Before you settle on your opinion, we've discovered 3 warning signs for Xiamen Comfort Science&Technology Group (1 doesn't sit too well with us!) that you should be aware of.

If strong companies turning a profit tickle your fancy, then you'll want to check out this free list of interesting companies that trade on a low P/E (but have proven they can grow earnings).

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