Unfortunately for some shareholders, the Infinities Technology International (Cayman) Holding Limited (HKG:1961) share price has dived 25% in the last thirty days, prolonging recent pain. The drop over the last 30 days has capped off a tough year for shareholders, with the share price down 48% in that time.

Even after such a large drop in price, it's still not a stretch to say that Infinities Technology International (Cayman) Holding's price-to-sales (or "P/S") ratio of 2.1x right now seems quite "middle-of-the-road" compared to the Entertainment industry in Hong Kong, where the median P/S ratio is around 1.7x. 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.

What Does Infinities Technology International (Cayman) Holding's P/S Mean For Shareholders?

With revenue growth that's exceedingly strong of late, Infinities Technology International (Cayman) Holding has been doing very well. The P/S is probably moderate because investors think this strong revenue growth might not be enough to outperform the broader industry in the near future. Those who are bullish on Infinities Technology International (Cayman) Holding will be hoping that this isn't the case, so that they can pick up the stock at a lower valuation.

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

Infinities Technology International (Cayman) Holding'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.

Taking a look back first, we see that the company grew revenue by an impressive 154% last year. Pleasingly, revenue has also lifted 55% in aggregate from three years ago, thanks to the last 12 months of growth. 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 20% over the next year, materially higher than the company's recent medium-term annualised growth rates.

In light of this, it's curious that Infinities Technology International (Cayman) Holding's P/S sits in line with the majority of other companies. It seems most investors are ignoring the fairly limited recent growth rates and are willing to pay up for exposure to the stock. Maintaining these prices will be difficult to achieve as a continuation of recent revenue trends is likely to weigh down the shares eventually.

What Does Infinities Technology International (Cayman) Holding's P/S Mean For Investors?

With its share price dropping off a cliff, the P/S for Infinities Technology International (Cayman) Holding looks to be in line with the rest of the Entertainment industry. We'd say the price-to-sales ratio's power isn't primarily as a valuation instrument but rather to gauge current investor sentiment and future expectations.

Our examination of Infinities Technology International (Cayman) Holding revealed its poor three-year revenue trends aren't resulting in a lower P/S as per our expectations, given they look worse than current industry outlook. When we see weak revenue with slower than industry growth, we suspect the share price is at risk of declining, bringing the P/S back in line with expectations. Unless there is a significant improvement in the company's medium-term performance, it will be difficult to prevent the P/S ratio from declining to a more reasonable level.

It is also worth noting that we have found 3 warning signs for Infinities Technology International (Cayman) Holding (1 is a bit unpleasant!) that you need to take into consideration.

If these risks are making you reconsider your opinion on Infinities Technology International (Cayman) Holding, explore our interactive list of high quality stocks to get an idea of what else is out there.

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