Despite an already strong run, Viva Goods Company Limited (HKG:933) shares have been powering on, with a gain of 29% in the last thirty days. But the gains over the last month weren't enough to make shareholders whole, as the share price is still down 2.6% in the last twelve months.

Although its price has surged higher, there still wouldn't be many who think Viva Goods' price-to-sales (or "P/S") ratio of 0.7x is worth a mention when it essentially matches the median P/S in Hong Kong's Luxury industry. However, investors might be overlooking a clear opportunity or potential setback if there is no rational basis for the P/S.

See our latest analysis for Viva Goods

How Has Viva Goods Performed Recently?

As an illustration, revenue has deteriorated at Viva Goods over the last year, which is not ideal at all. It might be that many expect the company to put the disappointing revenue performance behind them over the coming period, which has kept the P/S from falling. If not, then existing shareholders may be a little nervous about the viability of the share price.

Want the full picture on earnings, revenue and cash flow for the company? Then our free report on Viva Goods will help you shine a light on its historical performance.

Do Revenue Forecasts Match The P/S Ratio?

Viva Goods' 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.

In reviewing the last year of financials, we were disheartened to see the company's revenues fell to the tune of 6.2%. The latest three year period has seen an incredible overall rise in revenue, a stark contrast to the last 12 months. Therefore, it's fair to say the revenue growth recently has been superb for the company, but investors will want to ask why it is now in decline.

When compared to the industry's one-year growth forecast of 12%, the most recent medium-term revenue trajectory is noticeably more alluring

With this information, we find it interesting that Viva Goods is trading at a fairly similar P/S compared to the industry. Apparently some shareholders believe the recent performance is at its limits and have been accepting lower selling prices.

What We Can Learn From Viva Goods' P/S?

Viva Goods appears to be back in favour with a solid price jump bringing its P/S back in line with other companies in the industry Generally, our preference is to limit the use of the price-to-sales ratio to establishing what the market thinks about the overall health of a company.

We didn't quite envision Viva Goods' P/S sitting in line with the wider industry, considering the revenue growth over the last three-year is higher than the current industry outlook. There could be some unobserved threats to revenue preventing the P/S ratio from matching this positive performance. While recent revenue trends over the past medium-term suggest that the risk of a price decline is low, investors appear to see the likelihood of revenue fluctuations in the future.

Before you settle on your opinion, we've discovered 1 warning sign for Viva Goods that you should be aware of.

If you're unsure about the strength of Viva Goods' business, why not explore our interactive list of stocks with solid business fundamentals for some other companies you may have missed.

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