AuMake Limited (ASX:AUK) shareholders are no doubt pleased to see that the share price has bounced 50% in the last month, although it is still struggling to make up recently lost ground. But the last month did very little to improve the 57% share price decline over the last year.

Although its price has surged higher, it's still not a stretch to say that AuMake's price-to-sales (or "P/S") ratio of 0.4x right now seems quite "middle-of-the-road" compared to the Specialty Retail industry in Australia, where the median P/S ratio is around 0.6x. While this might not raise any eyebrows, if the P/S ratio is not justified investors could be missing out on a potential opportunity or ignoring looming disappointment.

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See our latest analysis for AuMake

What Does AuMake's Recent Performance Look Like?

AuMake certainly has been doing a great job lately as it's been growing its revenue at a really rapid pace. The P/S is probably moderate because investors think this strong revenue growth might not be enough to outperform the broader industry in the near future. 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.

We don't have analyst forecasts, but you can see how recent trends are setting up the company for the future by checking out our free report on AuMake's earnings, revenue and cash flow.

How Is AuMake's Revenue Growth Trending?

The only time you'd be comfortable seeing a P/S like AuMake'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 32%. Pleasingly, revenue has also lifted 179% in aggregate from three years ago, thanks to the last 12 months of growth. Therefore, it's fair to say the revenue growth recently has been superb for the company.

When compared to the industry's one-year growth forecast of 4.2%, the most recent medium-term revenue trajectory is noticeably more alluring

In light of this, it's curious that AuMake's P/S sits in line with the majority of other companies. Apparently some shareholders believe the recent performance is at its limits and have been accepting lower selling prices.

What Does AuMake's P/S Mean For Investors?

Its shares have lifted substantially and now AuMake's P/S is back within range of the industry median. 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've established that AuMake currently trades on a lower than expected P/S since its recent three-year growth is higher than the wider industry forecast. When we see strong revenue with faster-than-industry growth, we can only assume potential risks are what might be placing pressure on the P/S ratio. 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.

There are also other vital risk factors to consider before investing and we've discovered 4 warning signs for AuMake 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.