China Express Airlines Co.,LTD (SZSE:002928) shareholders that were waiting for something to happen have been dealt a blow with a 25% share price drop in the last month. For any long-term shareholders, the last month ends a year to forget by locking in a 57% share price decline.

Even after such a large drop in price, when almost half of the companies in China's Airlines industry have price-to-sales ratios (or "P/S") below 0.9x, you may still consider China Express AirlinesLTD as a stock probably not worth researching with its 1.5x P/S ratio. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's as high as it is.

How Has China Express AirlinesLTD Performed Recently?

With revenue growth that's inferior to most other companies of late, China Express AirlinesLTD has been relatively sluggish. It might be that many expect the uninspiring revenue performance to recover significantly, which has kept the P/S ratio from collapsing. However, if this isn't the case, investors might get caught out paying too much for the stock.

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

The only time you'd be truly comfortable seeing a P/S as high as China Express AirlinesLTD'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 65%. However, this wasn't enough as the latest three year period has seen the company endure a nasty 4.9% drop in revenue in aggregate. Therefore, it's fair to say the revenue growth recently has been undesirable for the company.

Looking ahead now, revenue is anticipated to climb by 67% during the coming year according to the nine analysts following the company. That's shaping up to be materially higher than the 24% growth forecast for the broader industry.

With this information, we can see why China Express AirlinesLTD is trading at such a high P/S compared to the industry. Apparently shareholders aren't keen to offload something that is potentially eyeing a more prosperous future.

The Key Takeaway

China Express AirlinesLTD's P/S remain high even after its stock plunged. 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.

As we suspected, our examination of China Express AirlinesLTD's analyst forecasts revealed that its superior revenue outlook is contributing to its high P/S. It appears that shareholders are confident in the company's future revenues, which is propping up the P/S. It's hard to see the share price falling strongly in the near future under these circumstances.

A lot of potential risks can sit within a company's balance sheet. You can assess many of the main risks through our free balance sheet analysis for China Express AirlinesLTD with six simple checks.

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).

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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.