Those holding Congyu Intelligent Agricultural Holdings Limited (HKG:875) shares would be relieved that the share price has rebounded 40% in the last thirty days, but it needs to keep going to repair the recent damage it has caused to investor portfolios. Unfortunately, the gains of the last month did little to right the losses of the last year with the stock still down 42% over that time.

In spite of the firm bounce in price, you could still be forgiven for feeling indifferent about Congyu Intelligent Agricultural Holdings' P/S ratio of 1x, since the median price-to-sales (or "P/S") ratio for the Food industry in Hong Kong is also close to 0.5x. However, investors might be overlooking a clear opportunity or potential setback if there is no rational basis for the P/S.

View our latest analysis for Congyu Intelligent Agricultural Holdings

What Does Congyu Intelligent Agricultural Holdings' Recent Performance Look Like?

For instance, Congyu Intelligent Agricultural Holdings' receding revenue in recent times would have to be some food for thought. It might be that many expect the company to put the disappointing revenue performance behind them over the coming period, which has kept the P/S from falling. If not, then existing shareholders may be a little nervous about the viability 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 Congyu Intelligent Agricultural Holdings' earnings, revenue and cash flow.

Is There Some Revenue Growth Forecasted For Congyu Intelligent Agricultural Holdings?

In order to justify its P/S ratio, Congyu Intelligent Agricultural Holdings would need to produce growth that's similar to the industry.

In reviewing the last year of financials, we were disheartened to see the company's revenues fell to the tune of 62%. That put a dampener on the good run it was having over the longer-term as its three-year revenue growth is still a noteworthy 25% in total. So we can start by confirming that the company has generally done a good job of growing revenue over that time, even though it had some hiccups along the way.

Comparing that to the industry, which is predicted to deliver 6.0% growth in the next 12 months, the company's momentum is pretty similar based on recent medium-term annualised revenue results.

With this information, we can see why Congyu Intelligent Agricultural Holdings is trading at a fairly similar P/S to the industry. Apparently shareholders are comfortable to simply hold on assuming the company will continue keeping a low profile.

The Final Word

Congyu Intelligent Agricultural Holdings' stock has a lot of momentum behind it lately, which has brought its P/S level with the rest of the 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.

It appears to us that Congyu Intelligent Agricultural Holdings maintains its moderate P/S off the back of its recent three-year growth being in line with the wider industry forecast. Right now shareholders are comfortable with the P/S as they are quite confident future revenue won't throw up any surprises. Given the current circumstances, it seems improbable that the share price will experience any significant movement in either direction in the near future if recent medium-term revenue trends persist.

You should always think about risks. Case in point, we've spotted 4 warning signs for Congyu Intelligent Agricultural Holdings you should be aware of, and 1 of them doesn't sit too well with us.

If these risks are making you reconsider your opinion on Congyu Intelligent Agricultural Holdings, explore our interactive list of high quality stocks to get an idea of what else is out there.

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