What You Can Learn From Jiumaojiu International Holdings Limited's (HKG:9922) P/S After Its 26% Share Price Crash

Jiumaojiu International Holdings Limited (HKG:9922) shareholders won't be pleased to see that the share price has had a very rough month, dropping 26% and undoing the prior period's positive performance. Instead of being rewarded, shareholders who have already held through the last twelve months are now sitting on a 12% share price drop.

Although its price has dipped substantially, you could still be forgiven for feeling indifferent about Jiumaojiu International Holdings' P/S ratio of 0.5x, since the median price-to-sales (or "P/S") ratio for the Hospitality industry in Hong Kong is also close to 0.8x. 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.

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Check out our latest analysis for Jiumaojiu International Holdings

How Has Jiumaojiu International Holdings Performed Recently?

Jiumaojiu International Holdings could be doing better as its revenue has been going backwards lately while most other companies have been seeing positive revenue growth. One possibility is that the P/S ratio is moderate because investors think this poor revenue performance will turn around. If not, then existing shareholders may be a little nervous about the viability of the share price.

If you'd like to see what analysts are forecasting going forward, you should check out our free report on Jiumaojiu International Holdings.

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

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

Taking a look back first, the company's revenue growth last year wasn't something to get excited about as it posted a disappointing decline of 6.6%. Still, the latest three year period has seen an excellent 42% overall rise in revenue, in spite of its unsatisfying short-term performance. Accordingly, while they would have preferred to keep the run going, shareholders would definitely welcome the medium-term rates of revenue growth.

Shifting to the future, estimates from the analysts covering the company suggest revenue should grow by 8.9% per year over the next three years. Meanwhile, the rest of the industry is forecast to expand by 10% per annum, which is not materially different.

With this information, we can see why Jiumaojiu International Holdings is trading at a fairly similar P/S to the industry. Apparently shareholders are comfortable to simply hold on while the company is keeping a low profile.

What Does Jiumaojiu International Holdings' P/S Mean For Investors?

With its share price dropping off a cliff, the P/S for Jiumaojiu International Holdings looks to be in line with the rest of the Hospitality industry. Generally, our preference is to limit the use of the price-to-sales ratio to establishing what the market thinks about the overall health of a company.

We've seen that Jiumaojiu International Holdings maintains an adequate P/S seeing as its revenue growth figures match the rest of the industry. Right now shareholders are comfortable with the P/S as they are quite confident future revenue won't throw up any surprises. Unless these conditions change, they will continue to support the share price at these levels.

Plus, you should also learn about these 2 warning signs we've spotted with Jiumaojiu International Holdings.

If you're unsure about the strength of Jiumaojiu International 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.