• Markets
• News
• Learn

Xiangxing International Holding Limited (HKG:1732) shares have retraced a considerable 31% in the last month, reversing a fair amount of their solid recent performance. The drop over the last 30 days has capped off a tough year for shareholders, with the share price down 24% in that time.

Although its price has dipped substantially, you could still be forgiven for feeling indifferent about Xiangxing International Holding's P/S ratio of 0.5x, since the median price-to-sales (or "P/S") ratio for the Shipping industry in Hong Kong is also close to 0.8x. However, investors might be overlooking a clear opportunity or potential setback if there is no rational basis for the P/S.

Check out our latest analysis for Xiangxing International Holding

How Has Xiangxing International Holding Performed Recently?

With revenue growth that's exceedingly strong of late, Xiangxing International Holding 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. If you like the company, you'd be hoping this isn't the case so that you could potentially pick up some stock while it's not quite in favour.

How Is Xiangxing International Holding's Revenue Growth Trending?

In order to justify its P/S ratio, Xiangxing International Holding would need to produce growth that's similar to the industry.

If we review the last year of revenue growth, the company posted a terrific increase of 33%. However, this wasn't enough as the latest three year period has seen the company endure a nasty 19% drop in revenue in aggregate. Therefore, it's fair to say the revenue growth recently has been undesirable for the company.

This is in contrast to the rest of the industry, which is expected to decline by 13% over the next year, even worse than the company's recent medium-term annualised revenue decline.

With this information, it's perhaps curious but not a major surprise that Xiangxing International Holding is trading at a fairly similar P/S in comparison. There's no guarantee the P/S has found a floor yet with recent revenue going backwards, despite the industry heading down even harder. It's conceivable that the P/S falls to lower levels if the company doesn't improve its top-line growth, which would be difficult to do with the current industry outlook.

What Does Xiangxing International Holding's P/S Mean For Investors?

Following Xiangxing International Holding's share price tumble, its P/S is just clinging on to the industry median P/S. 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.

We've established that Xiangxing International Holding currently trades on a slightly lower than expected P/S if you consider its recent three-year revenues aren't as bad as the forecasts for a struggling industry. The fact that the company's P/S is on par with the industry despite the fact that it outperformed it could be an indication of some unobserved threats to future revenues. Perhaps there is some hesitation about the company's ability to deviate from the industry's dismal performance and maintain a relatively smaller revenue decline. While the chance of a downward share price shock is quite unlikely, there does seem to be something concerning shareholders as the relative performance would usually justify a higher price.

Before you settle on your opinion, we've discovered 3 warning signs for Xiangxing International Holding (2 are a bit concerning!) that you should be aware of.

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).

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.