Investors Holding Back On APB Resources Berhad (KLSE:APB)

When you see that almost half of the companies in the Machinery industry in Malaysia have price-to-sales ratios (or "P/S") above 1.1x, APB Resources Berhad (KLSE:APB) looks to be giving off some buy signals with its 0.3x P/S ratio. 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 APB Resources Berhad

What Does APB Resources Berhad's P/S Mean For Shareholders?

Revenue has risen firmly for APB Resources Berhad recently, which is pleasing to see. One possibility is that the P/S is low because investors think this respectable revenue growth might actually underperform the broader industry in the near future. Those who are bullish on APB Resources Berhad will be hoping that this isn't the case, so that they can pick up the stock at a lower valuation.

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 APB Resources Berhad's earnings, revenue and cash flow.

How Is APB Resources Berhad's Revenue Growth Trending?

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

Retrospectively, the last year delivered an exceptional 24% gain to the company's top line. The latest three year period has also seen an excellent 62% overall rise in revenue, aided by its short-term performance. So we can start by confirming that the company has done a great job of growing revenue over that time.

Comparing that to the industry, which is predicted to deliver 16% growth in the next 12 months, the company's momentum is pretty similar based on recent medium-term annualised revenue results.

In light of this, it's peculiar that APB Resources Berhad's P/S sits below the majority of other companies. It may be that most investors are not convinced the company can maintain recent growth rates.

The Bottom Line On APB Resources Berhad's P/S

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.

The fact that APB Resources Berhad currently trades at a low P/S relative to the industry is unexpected considering its recent three-year growth is in line with the wider industry forecast. When we see industry-like revenue growth but a lower than expected P/S, we assume potential risks are what might be placing downward pressure on the share price. revenue trends suggest that the risk of a price decline is low, investors appear to perceive a possibility of revenue volatility in the future.

Before you settle on your opinion, we've discovered 3 warning signs for APB Resources Berhad (2 shouldn't be ignored!) 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).

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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.