Bonei Hatichon Civil Engineering & Infrastructures Ltd. (TLV:BOTI) Shares Fly 27% But Investors Aren't Buying For Growth

Bonei Hatichon Civil Engineering & Infrastructures Ltd. (TLV:BOTI) shareholders would be excited to see that the share price has had a great month, posting a 27% gain and recovering from prior weakness. Notwithstanding the latest gain, the annual share price return of 3.0% isn't as impressive.

Even after such a large jump in price, Bonei Hatichon Civil Engineering & Infrastructures may still be sending bullish signals at the moment with its price-to-sales (or "P/S") ratio of 2x, since almost half of all companies in the Real Estate industry in Israel have P/S ratios greater than 3.8x and even P/S higher than 7x are not unusual. However, the P/S might be low for a reason and it requires further investigation to determine if it's justified.

Check out our latest analysis for Bonei Hatichon Civil Engineering & Infrastructures

What Does Bonei Hatichon Civil Engineering & Infrastructures' P/S Mean For Shareholders?

As an illustration, revenue has deteriorated at Bonei Hatichon Civil Engineering & Infrastructures over the last year, which is not ideal at all. Perhaps the market believes the recent revenue performance isn't good enough to keep up the industry, causing the P/S ratio to suffer. However, if this doesn't eventuate then existing shareholders may be feeling optimistic about the future direction of the share price.

Although there are no analyst estimates available for Bonei Hatichon Civil Engineering & Infrastructures, take a look at this free data-rich visualisation to see how the company stacks up on earnings, revenue and cash flow.

How Is Bonei Hatichon Civil Engineering & Infrastructures' Revenue Growth Trending?

In order to justify its P/S ratio, Bonei Hatichon Civil Engineering & Infrastructures would need to produce sluggish growth that's trailing the industry.

Taking a look back first, the company's revenue growth last year wasn't something to get excited about as it posted a disappointing decline of 45%. The last three years don't look nice either as the company has shrunk revenue by 31% in aggregate. Therefore, it's fair to say the revenue growth recently has been undesirable for the company.

Comparing that to the industry, which is predicted to deliver 12% growth in the next 12 months, the company's downward momentum based on recent medium-term revenue results is a sobering picture.

In light of this, it's understandable that Bonei Hatichon Civil Engineering & Infrastructures' P/S would sit below the majority of other companies. Nonetheless, there's no guarantee the P/S has reached a floor yet with revenue going in reverse. Even just maintaining these prices could be difficult to achieve as recent revenue trends are already weighing down the shares.

What Does Bonei Hatichon Civil Engineering & Infrastructures' P/S Mean For Investors?

Despite Bonei Hatichon Civil Engineering & Infrastructures' share price climbing recently, its P/S still lags most other companies. Using the price-to-sales ratio alone to determine if you should sell your stock isn't sensible, however it can be a practical guide to the company's future prospects.

Our examination of Bonei Hatichon Civil Engineering & Infrastructures confirms that the company's shrinking revenue over the past medium-term is a key factor in its low price-to-sales ratio, given the industry is projected to grow. Right now shareholders are accepting the low P/S as they concede future revenue probably won't provide any pleasant surprises either. Unless the recent medium-term conditions improve, they will continue to form a barrier for the share price around these levels.

You should always think about risks. Case in point, we've spotted 4 warning signs for Bonei Hatichon Civil Engineering & Infrastructures you should be aware of, and 2 of them shouldn't be ignored.

If strong companies turning a profit tickle your fancy, then you'll want to check out this free list of interesting companies that trade on a low P/E (but have proven they can grow earnings).

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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.

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