Those holding Chaoda Modern Agriculture (Holdings) Limited (HKG:682) shares would be relieved that the share price has rebounded 42% in the last thirty days, but it needs to keep going to repair the recent damage it has caused to investor portfolios. Not all shareholders will be feeling jubilant, since the share price is still down a very disappointing 43% in the last twelve months.

Even after such a large jump in price, there still wouldn't be many who think Chaoda Modern Agriculture (Holdings)'s price-to-sales (or "P/S") ratio of 0.6x is worth a mention when the median P/S in Hong Kong's Food industry is similar at about 0.5x. Although, it's not wise to simply ignore the P/S without explanation as investors may be disregarding a distinct opportunity or a costly mistake.

View our latest analysis for Chaoda Modern Agriculture (Holdings)

What Does Chaoda Modern Agriculture (Holdings)'s Recent Performance Look Like?

Chaoda Modern Agriculture (Holdings) has been doing a decent job lately as it's been growing revenue at a reasonable pace. One possibility is that the P/S is moderate because investors think this good revenue growth might only be parallel to the broader industry in the near future. If not, then at least existing shareholders probably aren't too pessimistic about the future direction of the share price.

Is There Some Revenue Growth Forecasted For Chaoda Modern Agriculture (Holdings)?

There's an inherent assumption that a company should be matching the industry for P/S ratios like Chaoda Modern Agriculture (Holdings)'s to be considered reasonable.

If we review the last year of revenue growth, the company posted a worthy increase of 5.1%. The latest three year period has also seen a 21% overall rise in revenue, aided somewhat by its short-term performance. Accordingly, shareholders would have probably been satisfied with the medium-term rates of revenue growth.

Weighing that recent medium-term revenue trajectory against the broader industry's one-year forecast for expansion of 7.8% shows it's about the same on an annualised basis.

With this information, we can see why Chaoda Modern Agriculture (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 Bottom Line On Chaoda Modern Agriculture (Holdings)'s P/S

Chaoda Modern Agriculture (Holdings) appears to be back in favour with a solid price jump bringing its P/S back in line with other companies in the industry It's argued the price-to-sales ratio is an inferior measure of value within certain industries, but it can be a powerful business sentiment indicator.

It appears to us that Chaoda Modern Agriculture (Holdings) maintains its moderate P/S off the back of its recent three-year growth being in line with the wider industry forecast. Currently, with a past revenue trend that aligns closely wit the industry outlook, shareholders are confident the company's future revenue outlook won't contain any major surprises. If recent medium-term revenue trends continue, it's hard to see the share price moving strongly in either direction in the near future under these circumstances.

It is also worth noting that we have found 2 warning signs for Chaoda Modern Agriculture (Holdings) that you need to take into consideration.

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.

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