Revenues Not Telling The Story For China Jinmao Holdings Group Limited (HKG:817) After Shares Rise 38%

China Jinmao Holdings Group Limited (HKG:817) shareholders have had their patience rewarded with a 38% share price jump in the last month. Unfortunately, the gains of the last month did little to right the losses of the last year with the stock still down 10.0% over that time.

In spite of the firm bounce in price, you could still be forgiven for feeling indifferent about China Jinmao Holdings Group's P/S ratio of 0.2x, since the median price-to-sales (or "P/S") ratio for the Real Estate industry in Hong Kong is also close to 0.6x. While this might not raise any eyebrows, if the P/S ratio is not justified investors could be missing out on a potential opportunity or ignoring looming disappointment.

View our latest analysis for China Jinmao Holdings Group

How China Jinmao Holdings Group Has Been Performing

China Jinmao Holdings Group 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. You'd really hope so, otherwise you're paying a relatively elevated price for a company with this sort of growth profile.

Keen to find out how analysts think China Jinmao Holdings Group's future stacks up against the industry? In that case, our free report is a great place to start.

Do Revenue Forecasts Match The P/S Ratio?

China Jinmao Holdings Group's P/S ratio would be typical for a company that's only expected to deliver moderate growth, and importantly, perform in line with the industry.

In reviewing the last year of financials, we were disheartened to see the company's revenues fell to the tune of 17%. As a result, revenue from three years ago have also fallen 12% overall. Therefore, it's fair to say the revenue growth recently has been undesirable for the company.

Turning to the outlook, the next three years should bring diminished returns, with revenue decreasing 0.09% per annum as estimated by the twelve analysts watching the company. With the industry predicted to deliver 4.6% growth per annum, that's a disappointing outcome.

With this in consideration, we think it doesn't make sense that China Jinmao Holdings Group's P/S is closely matching its industry peers. It seems most investors are hoping for a turnaround in the company's business prospects, but the analyst cohort is not so confident this will happen. There's a good chance these shareholders are setting themselves up for future disappointment if the P/S falls to levels more in line with the negative growth outlook.

The Final Word

China Jinmao Holdings Group appears to be back in favour with a solid price jump bringing its P/S back in line with other companies in 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.

Our check of China Jinmao Holdings Group's analyst forecasts revealed that its outlook for shrinking revenue isn't bringing down its P/S as much as we would have predicted. When we see a gloomy outlook like this, our immediate thoughts are that the share price is at risk of declining, negatively impacting P/S. If the declining revenues were to materialize in the form of a declining share price, shareholders will be feeling the pinch.

And what about other risks? Every company has them, and we've spotted 2 warning signs for China Jinmao Holdings Group you should know about.

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.