The MIE Holdings Corporation (HKG:1555) share price has softened a substantial 27% over the previous 30 days, handing back much of the gains the stock has made lately. Still, a bad month hasn't completely ruined the past year with the stock gaining 60%, which is great even in a bull market.

After such a large drop in price, when close to half the companies operating in Hong Kong's Oil and Gas industry have price-to-sales ratios (or "P/S") above 0.8x, you may consider MIE Holdings as an enticing stock to check out with its 0.1x P/S ratio. However, the P/S might be low for a reason and it requires further investigation to determine if it's justified.

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Check out our latest analysis for MIE Holdings

How MIE Holdings Has Been Performing

As an illustration, revenue has deteriorated at MIE Holdings over the last year, which is not ideal at all. Perhaps the market believes the recent revenue performance isn't good enough to keep up the industry, causing the P/S ratio to suffer. Those who are bullish on MIE Holdings will be hoping that this isn't the case so that they can pick up the stock at a lower valuation.

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

Do Revenue Forecasts Match The Low P/S Ratio?

MIE Holdings' P/S ratio would be typical for a company that's only expected to deliver limited growth, and importantly, perform worse than the industry.

Taking a look back first, the company's revenue growth last year wasn't something to get excited about as it posted a disappointing decline of 13%. 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.

It's interesting to note that the rest of the industry is similarly expected to decline by 2.4% over the next year, which is just as bad as the company's recent medium-term revenue decline.

With this information, it's perhaps strange but not a major surprise that MIE Holdings is trading at a lower P/S in comparison. In general, shrinking revenues are unlikely to lead to a stable P/S long-term, which could set up shareholders for future disappointment regardless. There is still potential for the P/S to fall to even lower levels if the company doesn't improve its top-line growth, which would be difficult to do with the current industry outlook.

The Bottom Line On MIE Holdings' P/S

MIE Holdings' recently weak share price has pulled its P/S back below other Oil and Gas companies. 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.

Upon examining MIE Holdings, we found that its recent revenue decline over the past three-year is affecting its P/S ratio more than we initially expected, even though the wider industry is also expected to experience a decline in revenue. There could be some further unobserved threats to revenue preventing the P/S ratio from keeping up with the industry average. One major risk is whether the company can maintain its 'middle of the road' medium-termrevenue growth under these tough industry conditions. It appears some are indeed anticipating revenue instability, because this relative performance should normally provide more support to the share price.

There are also other vital risk factors to consider and we've discovered 3 warning signs for MIE Holdings (2 are significant!) that you should be aware of before investing here.

Of course, profitable companies with a history of great earnings growth are generally safer bets. So you may wish to see this free collection of other companies that have reasonable P/E ratios and have grown earnings strongly.

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.