Why We're Not Concerned Yet About Feytech Holdings Berhad's (KLSE:FEYTECH) 29% Share Price Plunge

To the annoyance of some shareholders, Feytech Holdings Berhad (KLSE:FEYTECH) shares are down a considerable 29% in the last month, which continues a horrid run for the company. Longer-term shareholders will rue the drop in the share price, since it's now virtually flat for the year after a promising few quarters.

Although its price has dipped substantially, you could still be forgiven for thinking Feytech Holdings Berhad is a stock not worth researching with a price-to-sales ratios (or "P/S") of 1.9x, considering almost half the companies in Malaysia's Auto Components industry have P/S ratios below 0.4x. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the elevated P/S.

Check out our latest analysis for Feytech Holdings Berhad

How Feytech Holdings Berhad Has Been Performing

With revenue growth that's superior to most other companies of late, Feytech Holdings Berhad has been doing relatively well. It seems the market expects this form will continue into the future, hence the elevated P/S ratio. You'd really hope so, otherwise you're paying a pretty hefty price for no particular reason.

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

What Are Revenue Growth Metrics Telling Us About The High P/S?

The only time you'd be truly comfortable seeing a P/S as high as Feytech Holdings Berhad's is when the company's growth is on track to outshine the industry.

Retrospectively, the last year delivered a decent 4.6% gain to the company's revenues. The latest three year period has also seen an excellent 159% 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.

Looking ahead now, revenue is anticipated to climb by 49% during the coming year according to the lone analyst following the company. Meanwhile, the rest of the industry is forecast to only expand by 13%, which is noticeably less attractive.

In light of this, it's understandable that Feytech Holdings Berhad's P/S sits above the majority of other companies. It seems most investors are expecting this strong future growth and are willing to pay more for the stock.

The Key Takeaway

Feytech Holdings Berhad's P/S remain high even after its stock plunged. While the price-to-sales ratio shouldn't be the defining factor in whether you buy a stock or not, it's quite a capable barometer of revenue expectations.

Our look into Feytech Holdings Berhad shows that its P/S ratio remains high on the merit of its strong future revenues. It appears that shareholders are confident in the company's future revenues, which is propping up the P/S. Unless the analysts have really missed the mark, these strong revenue forecasts should keep the share price buoyant.

You should always think about risks. Case in point, we've spotted 2 warning signs for Feytech Holdings Berhad you should be aware of, and 1 of them is a bit unpleasant.

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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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.