Investors Give Dalian Sunasia Tourism Holding CO.,LTD (SHSE:600593) Shares A 27% Hiding

The Dalian Sunasia Tourism Holding CO.,LTD (SHSE:600593) share price has softened a substantial 27% over the previous 30 days, handing back much of the gains the stock has made lately. Looking at the bigger picture, even after this poor month the stock is up 45% in the last year.

Although its price has dipped substantially, there still wouldn't be many who think Dalian Sunasia Tourism HoldingLTD's price-to-sales (or "P/S") ratio of 5.3x is worth a mention when it essentially matches the median P/S in China's Hospitality industry. Although, it's not wise to simply ignore the P/S without explanation as investors may be disregarding a distinct opportunity or a costly mistake.

See our latest analysis for Dalian Sunasia Tourism HoldingLTD

How Dalian Sunasia Tourism HoldingLTD Has Been Performing

With revenue growth that's exceedingly strong of late, Dalian Sunasia Tourism HoldingLTD has been doing very well. The P/S is probably moderate because investors think this strong revenue growth might not be enough to outperform the broader industry in the near future. If that doesn't eventuate, then existing shareholders have reason to be feeling optimistic about the future direction of the share price.

Although there are no analyst estimates available for Dalian Sunasia Tourism HoldingLTD, take a look at this free data-rich visualisation to see how the company stacks up on earnings, revenue and cash flow.

How Is Dalian Sunasia Tourism HoldingLTD's Revenue Growth Trending?

There's an inherent assumption that a company should be matching the industry for P/S ratios like Dalian Sunasia Tourism HoldingLTD's to be considered reasonable.

Retrospectively, the last year delivered an exceptional 145% gain to the company's top line. The strong recent performance means it was also able to grow revenue by 271% in total over the last three years. Accordingly, shareholders would have definitely welcomed those medium-term rates of revenue growth.

This is in contrast to the rest of the industry, which is expected to grow by 28% over the next year, materially lower than the company's recent medium-term annualised growth rates.

With this information, we find it interesting that Dalian Sunasia Tourism HoldingLTD 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 Bottom Line On Dalian Sunasia Tourism HoldingLTD's P/S

With its share price dropping off a cliff, the P/S for Dalian Sunasia Tourism HoldingLTD looks to be in line with the rest of the Hospitality industry. While the price-to-sales ratio shouldn't be the defining factor in whether you buy a stock or not, it's quite a capable barometer of revenue expectations.

To our surprise, Dalian Sunasia Tourism HoldingLTD 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. When we see strong revenue with faster-than-industry growth, we can only assume potential risks are what might be placing pressure on the P/S ratio. It appears some are indeed anticipating revenue instability, because the persistence of these recent medium-term conditions would normally provide a boost to the share price.

Before you take the next step, you should know about the 4 warning signs for Dalian Sunasia Tourism HoldingLTD (2 make us uncomfortable!) that we have uncovered.

If you're unsure about the strength of Dalian Sunasia Tourism HoldingLTD'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.