Congyu Intelligent Agricultural Holdings Limited (HKG:875) shareholders would be excited to see that the share price has had a great month, posting a 45% gain and recovering from prior weakness. Still, the 30-day jump doesn't change the fact that longer term shareholders have seen their stock decimated by the 80% share price drop in the last twelve months.

Even after such a large jump in price, given about half the companies operating in Hong Kong's Food industry have price-to-sales ratios (or "P/S") above 0.7x, you may still consider Congyu Intelligent Agricultural Holdings as an attractive investment with its 0.1x P/S ratio. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the reduced P/S.

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See our latest analysis for Congyu Intelligent Agricultural Holdings

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

As an illustration, revenue has deteriorated at Congyu Intelligent Agricultural Holdings over the last year, which is not ideal at all. It might be that many expect the disappointing revenue performance to continue or accelerate, which has repressed the P/S. 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 out of favour.

Although there are no analyst estimates available for Congyu Intelligent Agricultural Holdings, take a look at this free data-rich visualisation to see how the company stacks up on earnings, revenue and cash flow.

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

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

Retrospectively, the last year delivered a frustrating 13% decrease to the company's top line. Still, the latest three year period has seen an excellent 140% overall rise in revenue, in spite of its unsatisfying short-term performance. Although it's been a bumpy ride, it's still fair to say the revenue growth recently has been more than adequate for the company.

Comparing that recent medium-term revenue trajectory with the industry's one-year growth forecast of 4.3% shows it's noticeably more attractive.

With this information, we find it odd that Congyu Intelligent Agricultural Holdings is trading at a P/S lower than the industry. Apparently some shareholders believe the recent performance has exceeded its limits and have been accepting significantly lower selling prices.

The Bottom Line On Congyu Intelligent Agricultural Holdings' P/S

The latest share price surge wasn't enough to lift Congyu Intelligent Agricultural Holdings' P/S close to the industry median. 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.

Our examination of Congyu Intelligent Agricultural Holdings revealed its three-year revenue trends aren't boosting its P/S anywhere near as much as we would have predicted, given they look better than current industry expectations. Potential investors that are sceptical over continued revenue performance may be preventing the P/S ratio from matching previous strong performance. At least price risks look to be very low if recent medium-term revenue trends continue, but investors seem to think future revenue could see a lot of volatility.

Having said that, be aware Congyu Intelligent Agricultural Holdings is showing 3 warning signs in our investment analysis, and 1 of those can't be ignored.

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).

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.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.