Cautious Investors Not Rewarding ZOY Home Furnishing Co.,Ltd's (SHSE:603709) Performance Completely

With a price-to-sales (or "P/S") ratio of 0.9x ZOY Home Furnishing Co.,Ltd (SHSE:603709) may be sending bullish signals at the moment, given that almost half of all the Consumer Durables companies in China have P/S ratios greater than 2.2x and even P/S higher than 5x are not unusual. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the reduced P/S.

See our latest analysis for ZOY Home FurnishingLtd

What Does ZOY Home FurnishingLtd's Recent Performance Look Like?

Recent times have been quite advantageous for ZOY Home FurnishingLtd as its revenue has been rising very briskly. Perhaps the market is expecting future revenue performance to dwindle, 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.

Want the full picture on earnings, revenue and cash flow for the company? Then our free report on ZOY Home FurnishingLtd will help you shine a light on its historical performance.

Is There Any Revenue Growth Forecasted For ZOY Home FurnishingLtd?

ZOY Home FurnishingLtd'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.

If we review the last year of revenue growth, the company posted a terrific increase of 58%. Pleasingly, revenue has also lifted 35% in aggregate from three years ago, thanks to the last 12 months of growth. So we can start by confirming that the company has done a great job of growing revenue over that time.

Weighing that recent medium-term revenue trajectory against the broader industry's one-year forecast for expansion of 10% shows it's about the same on an annualised basis.

With this information, we find it odd that ZOY Home FurnishingLtd is trading at a P/S lower than the industry. It may be that most investors are not convinced the company can maintain recent growth rates.

The Bottom Line On ZOY Home FurnishingLtd's P/S

Using the price-to-sales ratio alone to determine if you should sell your stock isn't sensible, however it can be a practical guide to the company's future prospects.

The fact that ZOY Home FurnishingLtd currently trades at a low P/S relative to the industry is unexpected considering its recent three-year growth is in line with the wider industry forecast. There could be some unobserved threats to revenue preventing the P/S ratio from matching the company's performance. While recent

It is also worth noting that we have found 3 warning signs for ZOY Home FurnishingLtd that you need to take into consideration.

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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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.