HSC Resources Group Limited (HKG:1850) shareholders are no doubt pleased to see that the share price has bounced 27% in the last month, although it is still struggling to make up recently lost ground. Not all shareholders will be feeling jubilant, since the share price is still down a very disappointing 36% in the last twelve months.

In spite of the firm bounce in price, you could still be forgiven for feeling indifferent about HSC Resources Group's P/S ratio of 0.3x, since the median price-to-sales (or "P/S") ratio for the Commercial Services industry in Hong Kong is also close to 0.5x. However, investors might be overlooking a clear opportunity or potential setback if there is no rational basis for the P/S.

How Has HSC Resources Group Performed Recently?

With revenue growth that's exceedingly strong of late, HSC Resources Group has been doing very well. It might be that many expect the strong revenue performance to wane, which has kept the share price, and thus the P/S ratio, from rising. Those who are bullish on HSC Resources Group will be hoping that this isn't the case, so that they can pick up the stock at a lower valuation.

How Is HSC Resources Group's Revenue Growth Trending?

HSC Resources Group's P/S ratio would be typical for a company that's only expected to deliver moderate growth, and importantly, perform in line with the industry.

If we review the last year of revenue growth, the company posted a terrific increase of 68%. The latest three year period has also seen an excellent 106% 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.

Comparing that recent medium-term revenue trajectory with the industry's one-year growth forecast of 6.8% shows it's noticeably more attractive.

In light of this, it's curious that HSC Resources Group's P/S sits in line with the majority of other companies. It may be that most investors are not convinced the company can maintain its recent growth rates.

The Final Word

Its shares have lifted substantially and now HSC Resources Group's P/S is back within range of the industry median. 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.

To our surprise, HSC Resources Group revealed its three-year revenue trends aren't contributing to its P/S as much as we would have predicted, given they look better than current industry expectations. It'd be fair to assume that potential risks the company faces could be the contributing factor to the lower than expected P/S. At least the risk of a price drop looks to be subdued if recent medium-term revenue trends continue, but investors seem to think future revenue could see some volatility.

Before you take the next step, you should know about the 5 warning signs for HSC Resources Group (3 don't sit too well with us!) that we have uncovered.

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.