With a median price-to-sales (or "P/S") ratio of close to 0.3x in the Logistics industry in Hong Kong, you could be forgiven for feeling indifferent about JD Logistics, Inc.'s (HKG:2618) P/S ratio of 0.4x. However, investors might be overlooking a clear opportunity or potential setback if there is no rational basis for the P/S.

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See our latest analysis for JD Logistics

How JD Logistics Has Been Performing

JD Logistics' revenue growth of late has been pretty similar to most other companies. The P/S ratio is probably moderate because investors think this modest revenue performance will continue. Those who are bullish on JD Logistics will be hoping that revenue performance can pick up, so that they can pick up the stock at a slightly lower valuation.

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

How Is JD Logistics' Revenue Growth Trending?

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

Retrospectively, the last year delivered a decent 9.7% gain to the company's revenues. The latest three year period has also seen an excellent 75% overall rise in revenue, aided somewhat by its short-term performance. So we can start by confirming that the company has done a great job of growing revenues over that time.

Shifting to the future, estimates from the analysts covering the company suggest revenue should grow by 9.9% per year over the next three years. Meanwhile, the rest of the industry is forecast to only expand by 7.7% per annum, which is noticeably less attractive.

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

The Key Takeaway

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.

Looking at JD Logistics' analyst forecasts revealed that its superior revenue outlook isn't giving the boost to its P/S that we would've expected. There could be some risks that the market is pricing in, which is preventing the P/S ratio from matching the positive outlook. This uncertainty seems to be reflected in the share price which, while stable, could be higher given the revenue forecasts.

A lot of potential risks can sit within a company's balance sheet. Take a look at our free balance sheet analysis for JD Logistics with six simple checks on some of these key factors.

If companies with solid past earnings growth is up your alley, you may wish to see this free collection of other companies with strong earnings growth and low P/E ratios.

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