China Partytime Culture Holdings Limited's (HKG:1532) 25% Jump Shows Its Popularity With Investors

China Partytime Culture Holdings Limited (HKG:1532) shares have continued their recent momentum with a 25% gain in the last month alone. The bad news is that even after the stocks recovery in the last 30 days, shareholders are still underwater by about 5.0% over the last year.

In spite of the firm bounce in price, there still wouldn't be many who think China Partytime Culture Holdings' price-to-sales (or "P/S") ratio of 0.6x is worth a mention when the median P/S in Hong Kong's Luxury industry is similar at about 0.7x. However, investors might be overlooking a clear opportunity or potential setback if there is no rational basis for the P/S.

See our latest analysis for China Partytime Culture Holdings

How China Partytime Culture Holdings Has Been Performing

For example, consider that China Partytime Culture Holdings' financial performance has been pretty ordinary lately as revenue growth is non-existent. One possibility is that the P/S is moderate because investors think this benign revenue growth rate might not be enough to outperform the broader industry in the near future. If not, then existing shareholders may be feeling hopeful about the future direction of the share price.

We don't have analyst forecasts, but you can see how recent trends are setting up the company for the future by checking out our free report on China Partytime Culture Holdings' earnings, revenue and cash flow.

Is There Some Revenue Growth Forecasted For China Partytime Culture Holdings?

There's an inherent assumption that a company should be matching the industry for P/S ratios like China Partytime Culture Holdings' to be considered reasonable.

If we review the last year of revenue, the company posted a result that saw barely any deviation from a year ago. However, a few strong years before that means that it was still able to grow revenue by an impressive 37% in total over the last three years. Accordingly, shareholders will be pleased, but also have some questions to ponder about the last 12 months.

Weighing that recent medium-term revenue trajectory against the broader industry's one-year forecast for expansion of 12% shows it's about the same on an annualised basis.

In light of this, it's understandable that China Partytime Culture Holdings' P/S sits in line with the majority of other companies. Apparently shareholders are comfortable to simply hold on assuming the company will continue keeping a low profile.

What Does China Partytime Culture Holdings' P/S Mean For Investors?

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

As we've seen, China Partytime Culture Holdings' three-year revenue trends seem to be contributing to its P/S, given they look similar to current industry expectations. Right now shareholders are comfortable with the P/S as they are quite confident future revenue won't throw up any surprises. If recent medium-term revenue trends continue, it's hard to see the share price moving strongly in either direction in the near future under these circumstances.

Plus, you should also learn about these 4 warning signs we've spotted with China Partytime Culture Holdings (including 2 which make us uncomfortable).

If you're unsure about the strength of China Partytime Culture Holdings' 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.