China Supply Chain Holdings Limited (HKG:3708) Stocks Shoot Up 30% But Its P/S Still Looks Reasonable

China Supply Chain Holdings Limited (HKG:3708) shareholders are no doubt pleased to see that the share price has bounced 30% in the last month, although it is still struggling to make up recently lost ground. But the last month did very little to improve the 78% share price decline over the last year.

Although its price has surged higher, you could still be forgiven for feeling indifferent about China Supply Chain Holdings' P/S ratio of 0.3x, since the median price-to-sales (or "P/S") ratio for the Construction industry in Hong Kong is about the same. However, investors might be overlooking a clear opportunity or potential setback if there is no rational basis for the P/S.

View our latest analysis for China Supply Chain Holdings

How Has China Supply Chain Holdings Performed Recently?

China Supply Chain Holdings 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 that doesn't eventuate, then existing shareholders probably aren't too pessimistic about the future direction of the share price.

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

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

In order to justify its P/S ratio, China Supply Chain Holdings would need to produce growth that's similar to the industry.

Taking a look back first, we see that the company grew revenue by an impressive 26% last year. The latest three year period has also seen an excellent 44% overall rise in revenue, aided by its short-term performance. Accordingly, shareholders would have definitely welcomed those medium-term rates of revenue growth.

Weighing that recent medium-term revenue trajectory against the broader industry's one-year forecast for expansion of 11% shows it's about the same on an annualised basis.

With this information, we can see why China Supply Chain Holdings is trading at a fairly similar P/S to the industry. Apparently shareholders are comfortable to simply hold on assuming the company will continue keeping a low profile.

What Does China Supply Chain Holdings' P/S Mean For Investors?

China Supply Chain Holdings' stock has a lot of momentum behind it lately, which has brought its P/S level with the rest of the 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.

It appears to us that China Supply Chain Holdings maintains its moderate P/S off the back of its recent three-year growth being in line with the wider industry forecast. With previous revenue trends that keep up with the current industry outlook, it's hard to justify the company's P/S ratio deviating much from it's current point. Unless the recent medium-term conditions change, they will continue to support the share price at these levels.

Having said that, be aware China Supply Chain Holdings is showing 2 warning signs in our investment analysis, and 1 of those doesn't sit too well with us.

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.