With a price-to-sales (or "P/S") ratio of 0.3x CDT Environmental Technology Investment Holdings Limited (NASDAQ:CDTG) may be sending bullish signals at the moment, given that almost half of all the Commercial Services companies in the United States have P/S ratios greater than 1.7x and even P/S higher than 5x are not unusual. 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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View our latest analysis for CDT Environmental Technology Investment Holdings

What Does CDT Environmental Technology Investment Holdings' Recent Performance Look Like?

For example, consider that CDT Environmental Technology Investment Holdings' financial performance has been poor lately as its revenue has been in decline. Perhaps the market believes the recent revenue performance isn't good enough to keep up the industry, causing the P/S ratio to suffer. 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.

Want the full picture on earnings, revenue and cash flow for the company? Then our free report on CDT Environmental Technology Investment Holdings will help you shine a light on its historical performance.

How Is CDT Environmental Technology Investment Holdings' Revenue Growth Trending?

In order to justify its P/S ratio, CDT Environmental Technology Investment Holdings would need to produce sluggish growth that's trailing 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%. Regardless, revenue has managed to lift by a handy 26% in aggregate from three years ago, thanks to the earlier period of growth. Accordingly, while they would have preferred to keep the run going, shareholders would be roughly satisfied with the medium-term rates of revenue growth.

It's interesting to note that the rest of the industry is similarly expected to grow by 6.7% over the next year, which is fairly even with the company's recent medium-term annualised growth rates.

In light of this, it's peculiar that CDT Environmental Technology Investment Holdings' P/S sits below the majority of other companies. It may be that most investors are not convinced the company can maintain recent growth rates.

The Key Takeaway

Generally, our preference is to limit the use of the price-to-sales ratio to establishing what the market thinks about the overall health of a company.

The fact that CDT Environmental Technology Investment Holdings currently trades at a low P/S relative to the industry is unexpected considering its recent three-year growth is in line with the wider industry forecast. There could be some unobserved threats to revenue preventing the P/S ratio from matching the company's performance. It appears some are indeed anticipating revenue instability, because the persistence of these recent medium-term conditions should normally provide more support to the share price.

Before you settle on your opinion, we've discovered 4 warning signs for CDT Environmental Technology Investment Holdings (2 can't be ignored!) that you should be aware of.

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

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