Lufax Holding Ltd (NYSE:LU) shareholders would be excited to see that the share price has had a great month, posting a 33% gain and recovering from prior weakness. Not all shareholders will be feeling jubilant, since the share price is still down a very disappointing 20% in the last twelve months.

Although its price has surged higher, when close to half the companies operating in the United States' Consumer Finance industry have price-to-sales ratios (or "P/S") above 1.5x, you may still consider Lufax Holding as an enticing stock to check out with its 0.4x P/S ratio. However, the P/S might be low for a reason and it requires further investigation to determine if it's justified.

What Does Lufax Holding's Recent Performance Look Like?

Recent times haven't been great for Lufax Holding as its revenue has been rising slower than most other companies. The P/S ratio is probably low because investors think this lacklustre revenue performance isn't going to get any better. If this is the case, then existing shareholders will probably struggle to get excited about the future direction of the share price.

Keen to find out how analysts think Lufax Holding's future stacks up against the industry? In that case, our free report is a great place to start.

How Is Lufax Holding's Revenue Growth Trending?

There's an inherent assumption that a company should underperform the industry for P/S ratios like Lufax Holding's to be considered reasonable.

Taking a look back first, we see that there was hardly any revenue growth to speak of for the company over the past year. The lack of growth did nothing to help the company's aggregate three-year performance, which is an unsavory 20% drop in revenue. So unfortunately, we have to acknowledge that the company has not done a great job of growing revenue over that time.

Shifting to the future, estimates from the eight analysts covering the company suggest revenue growth is heading into negative territory, declining 12% each year over the next three years. That's not great when the rest of the industry is expected to grow by 13% per year.

With this in consideration, we find it intriguing that Lufax Holding's P/S is closely matching its industry peers. Nonetheless, there's no guarantee the P/S has reached a floor yet with revenue going in reverse. There's potential for the P/S to fall to even lower levels if the company doesn't improve its top-line growth.

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

Lufax Holding's stock price has surged recently, but its but its P/S still remains modest. 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.

As we suspected, our examination of Lufax Holding's analyst forecasts revealed that its outlook for shrinking revenue is contributing to its low P/S. At this stage investors feel the potential for an improvement in revenue isn't great enough to justify a higher P/S ratio. Unless there's material change, it's hard to envision a situation where the stock price will rise drastically.

Don't forget that there may be other risks. For instance, we've identified 2 warning signs for Lufax Holding (1 doesn't sit too well with us) you should be aware of.

If these risks are making you reconsider your opinion on Lufax Holding, 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.