To the annoyance of some shareholders, Coolpoint Innonism Holding Limited (HKG:8040) shares are down a considerable 26% in the last month, which continues a horrid run for the company. The drop over the last 30 days has capped off a tough year for shareholders, with the share price down 44% in that time.

Although its price has dipped substantially, there still wouldn't be many who think Coolpoint Innonism Holding's price-to-sales (or "P/S") ratio of 0.3x is worth a mention when it essentially matches the median P/S in Hong Kong's Construction industry. However, investors might be overlooking a clear opportunity or potential setback if there is no rational basis for the P/S.

How Has Coolpoint Innonism Holding Performed Recently?

Coolpoint Innonism Holding has been doing a good job lately as it's been growing revenue at a solid pace. It might be that many expect the respectable revenue performance to wane, which has kept the P/S from rising. 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 not quite in favour.

How Is Coolpoint Innonism Holding's Revenue Growth Trending?

In order to justify its P/S ratio, Coolpoint Innonism Holding would need to produce growth that's similar to the industry.

Retrospectively, the last year delivered an exceptional 18% gain to the company's top line. Pleasingly, revenue has also lifted 83% in aggregate from three years ago, thanks to the last 12 months of growth. Therefore, it's fair to say the revenue growth recently has been superb for the company.

Comparing that recent medium-term revenue trajectory with the industry's one-year growth forecast of 8.8% shows it's noticeably more attractive.

With this information, we find it interesting that Coolpoint Innonism Holding is trading at a fairly similar P/S compared to the industry. Apparently some shareholders believe the recent performance is at its limits and have been accepting lower selling prices.

The Key Takeaway

With its share price dropping off a cliff, the P/S for Coolpoint Innonism Holding looks to be in line with the rest of the Construction industry. 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.

To our surprise, Coolpoint Innonism Holding revealed its three-year revenue trends aren't contributing to its P/S as much as we would have predicted, given they look better than current industry expectations. There could be some unobserved threats to revenue preventing the P/S ratio from matching this positive performance. While recent revenue trends over the past medium-term suggest that the risk of a price decline is low, investors appear to see the likelihood of revenue fluctuations in the future.

It is also worth noting that we have found 2 warning signs for Coolpoint Innonism Holding (1 can't be ignored!) that you need to take into consideration.

It's important to make sure you look for a great company, not just the first idea you come across. So if growing profitability aligns with your idea of a great company, take a peek at this free list of interesting companies with strong recent earnings growth (and a low P/E).

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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.