JD Logistics, Inc.'s (HKG:2618) 27% Cheaper Price Remains In Tune With Revenues

The JD Logistics, Inc. (HKG:2618) share price has fared very poorly over the last month, falling by a substantial 27%. The recent drop completes a disastrous twelve months for shareholders, who are sitting on a 59% loss during that time.

In spite of the heavy fall in price, there still wouldn't be many who think JD Logistics' price-to-sales (or "P/S") ratio of 0.2x is worth a mention when the median P/S in Hong Kong's Logistics industry is similar at about 0.3x. 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.

View our latest analysis for JD Logistics

How JD Logistics Has Been Performing

Recent times have been advantageous for JD Logistics as its revenues have been rising faster than most other companies. Perhaps the market is expecting this level of performance to taper off, keeping the P/S from soaring. If you like the company, you'd be hoping this isn't the case so that you could potentially pick up some stock while it's not quite in favour.

Want the full picture on analyst estimates for the company? Then our free report on JD Logistics will help you uncover what's on the horizon.

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

The only time you'd be comfortable seeing a P/S like JD Logistics' is when the company's growth is tracking the industry closely.

Taking a look back first, we see that the company grew revenue by an impressive 30% last year. The strong recent performance means it was also able to grow revenue by 121% in total over the last three years. So we can start by confirming that the company has done a great job of growing revenue over that time.

Turning to the outlook, the next three years should generate growth of 7.0% per annum as estimated by the analysts watching the company. With the industry predicted to deliver 7.8% growth per annum, the company is positioned for a comparable revenue result.

With this in mind, it makes sense that JD Logistics' P/S is closely matching its industry peers. Apparently shareholders are comfortable to simply hold on while the company is keeping a low profile.

What Does JD Logistics' P/S Mean For Investors?

With its share price dropping off a cliff, the P/S for JD Logistics looks to be in line with the rest of the Logistics industry. We'd say the price-to-sales ratio's power isn't primarily as a valuation instrument but rather to gauge current investor sentiment and future expectations.

A JD Logistics' P/S seems about right to us given the knowledge that analysts are forecasting a revenue outlook that is similar to the Logistics industry. Right now shareholders are comfortable with the P/S as they are quite confident future revenue won't throw up any surprises. All things considered, if the P/S and revenue estimates contain no major shocks, then it's hard to see the share price moving strongly in either direction in the near future.

The company's balance sheet is another key area for risk analysis. Our free balance sheet analysis for JD Logistics with six simple checks will allow you to discover any risks that could be an issue.

If you're unsure about the strength of JD Logistics' 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.