Change Financial Limited (ASX:CCA) shares have had a horrible month, losing 26% after a relatively good period beforehand. Instead of being rewarded, shareholders who have already held through the last twelve months are now sitting on a 15% share price drop.

Although its price has dipped substantially, there still wouldn't be many who think Change Financial's price-to-sales (or "P/S") ratio of 1.7x is worth a mention when the median P/S in Australia's Diversified Financial industry is similar at about 1.6x. 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.

View our latest analysis for Change Financial

What Does Change Financial's P/S Mean For Shareholders?

Recent times have been advantageous for Change Financial as its revenues have been rising faster than most other companies. It might be that many expect the strong revenue performance to wane, which has kept 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.

If you'd like to see what analysts are forecasting going forward, you should check out our free report on Change Financial.

How Is Change Financial's Revenue Growth Trending?

The only time you'd be comfortable seeing a P/S like Change Financial's is when the company's growth is tracking the industry closely.

If we review the last year of revenue growth, the company posted a terrific increase of 50%. The latest three year period has also seen an excellent 68% 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.

Shifting to the future, estimates from the lone analyst covering the company suggest revenue growth will be highly resilient over the next year growing by 42%. With the rest of the industry predicted to shrink by 20%, that would be a fantastic result.

In light of this, it's peculiar that Change Financial's P/S sits in-line with the majority of other companies. Apparently some shareholders are skeptical of the contrarian forecasts and have been accepting lower selling prices.

The Bottom Line On Change Financial's P/S

Change Financial's plummeting stock price has brought its P/S back to a similar region as the rest of the industry. 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.

Our examination of Change Financial's analyst forecasts revealed that its superior revenue outlook against a shaky industry isn't resulting in the company trading at a higher P/S, as per our expectations. We assume that investors are attributing some risk to the company's future revenues, keeping it from trading at a higher P/S. The market could be pricing in the event that tough industry conditions will impact future revenues. It appears some are indeed anticipating revenue instability, because the company's current prospects should normally provide a boost to the share price.

Don't forget that there may be other risks. For instance, we've identified 1 warning sign for Change Financial that you should be aware of.

If these risks are making you reconsider your opinion on Change Financial, explore our interactive list of high quality stocks to get an idea of what else is out there.

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.