Fewer Investors Than Expected Jumping On China Jinmao Holdings Group Limited (HKG:817)

China Jinmao Holdings Group Limited's (HKG:817) price-to-sales (or "P/S") ratio of 0.1x might make it look like a buy right now compared to the Real Estate industry in Hong Kong, where around half of the companies have P/S ratios above 0.6x and even P/S above 3x are quite common. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's limited.

See our latest analysis for China Jinmao Holdings Group

What Does China Jinmao Holdings Group's Recent Performance Look Like?

With revenue that's retreating more than the industry's average of late, China Jinmao Holdings Group has been very sluggish. It seems that many are expecting the dismal revenue performance to persist, which has repressed the P/S. You'd much rather the company improve its revenue performance if you still believe in the business. If not, then existing shareholders will probably struggle to get excited about the future direction of the share price.

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

Is There Any Revenue Growth Forecasted For China Jinmao Holdings Group?

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

In reviewing the last year of financials, we were disheartened to see the company's revenues fell to the tune of 10%. However, a few very strong years before that means that it was still able to grow revenue by an impressive 99% in total over the last three years. 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 5.2% per year over the next three years. That's shaping up to be similar to the 6.8% per annum growth forecast for the broader industry.

With this in consideration, we find it intriguing that China Jinmao Holdings Group's P/S is lagging behind its industry peers. Apparently some shareholders are doubtful of the forecasts and have been accepting lower selling prices.

What We Can Learn From China Jinmao Holdings Group's P/S?

Typically, we'd caution against reading too much into price-to-sales ratios when settling on investment decisions, though it can reveal plenty about what other market participants think about the company.

We've seen that China Jinmao Holdings Group currently trades on a lower than expected P/S since its forecast growth is in line with the wider industry. When we see middle-of-the-road revenue growth like this, we assume it must be the potential risks that are what is placing pressure on the P/S ratio. Perhaps investors are concerned that the company could underperform against the forecasts over the near term.

Don't forget that there may be other risks. For instance, we've identified 2 warning signs for China Jinmao Holdings Group (1 is concerning) you should be aware of.

It's important to make sure you look for a great company, not just the first idea you come across. So if growing profitability aligns with your idea of a great company, take a peek at this free list of interesting companies with strong recent earnings growth (and a low P/E).

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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.