The Market Doesn't Like What It Sees From Bonei Hatichon Civil Engineering & Infrastructures Ltd.'s (TLV:BOTI) Revenues Yet

You may think that with a price-to-sales (or "P/S") ratio of 1.8x Bonei Hatichon Civil Engineering & Infrastructures Ltd. (TLV:BOTI) is a stock worth checking out, seeing as almost half of all the Real Estate companies in Israel have P/S ratios greater than 3.3x and even P/S higher than 7x aren't out of the ordinary. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's limited.

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

What Does Bonei Hatichon Civil Engineering & Infrastructures' Recent Performance Look Like?

Recent times have been quite advantageous for Bonei Hatichon Civil Engineering & Infrastructures as its revenue has been rising very briskly. One possibility is that the P/S ratio is low because investors think this strong revenue growth might actually underperform the broader industry in the near future. If that doesn't eventuate, then existing shareholders have reason to be quite optimistic about the future direction of the share price.

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 Bonei Hatichon Civil Engineering & Infrastructures' 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.

Retrospectively, the last year delivered an exceptional 46% gain to the company's top line. Despite this strong recent growth, it's still struggling to catch up as its three-year revenue frustratingly shrank by 19% overall. So unfortunately, we have to acknowledge that the company has not done a great job of growing revenues over that time.

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.

With this in mind, we understand why Bonei Hatichon Civil Engineering & Infrastructures' P/S is lower than most of 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.

The Bottom Line On Bonei Hatichon Civil Engineering & Infrastructures' P/S

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.

As we suspected, our examination of Bonei Hatichon Civil Engineering & Infrastructures revealed its shrinking revenue over the medium-term is contributing to its low P/S, given the industry is set to grow. At this stage investors feel the potential for an improvement in revenue isn't great enough to justify a higher P/S ratio. Given the current circumstances, it seems unlikely that the share price will experience any significant movement in either direction in the near future if recent medium-term revenue trends persist.

We don't want to rain on the parade too much, but we did also find 2 warning signs for Bonei Hatichon Civil Engineering & Infrastructures (1 shouldn't be ignored!) that you need to be mindful of.

If you're unsure about the strength of Bonei Hatichon Civil Engineering & Infrastructures' business, why not explore our interactive list of stocks with solid business fundamentals for some other companies you may have missed.

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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.