Global Strategic Group Limited (HKG:8007) shares have continued their recent momentum with a 31% gain in the last month alone. The last month tops off a massive increase of 223% in the last year.

Since its price has surged higher, given close to half the companies operating in Hong Kong's Trade Distributors industry have price-to-sales ratios (or "P/S") below 0.6x, you may consider Global Strategic Group as a stock to potentially avoid with its 2.5x P/S ratio. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the elevated P/S.

See our latest analysis for Global Strategic Group

How Global Strategic Group Has Been Performing

The revenue growth achieved at Global Strategic Group over the last year would be more than acceptable for most companies. One possibility is that the P/S ratio is high because investors think this respectable revenue growth will be enough to outperform the broader industry in the near future. However, if this isn't the case, investors might get caught out paying too much for the stock.

Is There Enough Revenue Growth Forecasted For Global Strategic Group?

The only time you'd be truly comfortable seeing a P/S as high as Global Strategic Group's is when the company's growth is on track to outshine the industry.

If we review the last year of revenue growth, the company posted a terrific increase of 18%. The latest three year period has also seen an excellent 259% overall rise in revenue, aided by its short-term performance. Therefore, it's fair to say the revenue growth recently has been superb for the company.

This is in contrast to the rest of the industry, which is expected to grow by 3.7% over the next year, materially lower than the company's recent medium-term annualised growth rates.

In light of this, it's understandable that Global Strategic Group's P/S sits above the majority of other companies. Presumably shareholders aren't keen to offload something they believe will continue to outmanoeuvre the wider industry.

What Does Global Strategic Group's P/S Mean For Investors?

The large bounce in Global Strategic Group's shares has lifted the company's P/S handsomely. 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.

As we suspected, our examination of Global Strategic Group revealed its three-year revenue trends are contributing to its high P/S, given they look better than current industry expectations. At this stage investors feel the potential continued revenue growth in the future is great enough to warrant an inflated P/S. Barring any significant changes to the company's ability to make money, the share price should continue to be propped up.

Plus, you should also learn about these 3 warning signs we've spotted with Global Strategic Group (including 2 which are a bit unpleasant).

If companies with solid past earnings growth is up your alley, you may wish to see this free collection of other companies with strong earnings growth and low P/E ratios.

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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.