Investors Still Aren't Entirely Convinced By ARK Resources Holdings Berhad's (KLSE:ARK) Revenues Despite 28% Price Jump

Despite an already strong run, ARK Resources Holdings Berhad (KLSE:ARK) shares have been powering on, with a gain of 28% in the last thirty days. Looking back a bit further, it's encouraging to see the stock is up 51% in the last year.

Although its price has surged higher, it would still be understandable if you think ARK Resources Holdings Berhad is a stock with good investment prospects with a price-to-sales ratios (or "P/S") of 0.3x, considering almost half the companies in Malaysia's Construction industry have P/S ratios above 1x. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the reduced P/S.

See our latest analysis for ARK Resources Holdings Berhad

What Does ARK Resources Holdings Berhad's Recent Performance Look Like?

With revenue growth that's exceedingly strong of late, ARK Resources Holdings Berhad has been doing very well. Perhaps the market is expecting future revenue performance to dwindle, which has kept the P/S suppressed. Those who are bullish on ARK Resources Holdings 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 ARK Resources Holdings Berhad's earnings, revenue and cash flow.

Is There Any Revenue Growth Forecasted For ARK Resources Holdings Berhad?

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

Taking a look back first, we see that the company's revenues underwent some rampant growth over the last 12 months. Spectacularly, three year revenue growth has also set the world alight, thanks to the last 12 months of incredible growth. Accordingly, shareholders would have been over the moon with those medium-term rates of revenue growth.

This is in contrast to the rest of the industry, which is expected to grow by 17% over the next year, materially lower than the company's recent medium-term annualised growth rates.

With this in mind, we find it intriguing that ARK Resources Holdings Berhad's P/S isn't as high compared to that of its industry peers. Apparently some shareholders believe the recent performance has exceeded its limits and have been accepting significantly lower selling prices.

What Does ARK Resources Holdings Berhad's P/S Mean For Investors?

ARK Resources Holdings Berhad's stock price has surged recently, but its but its P/S still remains modest. 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.

Our examination of ARK Resources Holdings Berhad revealed its three-year revenue trends aren't boosting its P/S anywhere near as much as we would have predicted, given they look better than current industry expectations. Potential investors that are sceptical over continued revenue performance may be preventing the P/S ratio from matching previous strong performance. It appears many are indeed anticipating revenue instability, because the persistence of these recent medium-term conditions would normally provide a boost to the share price.

Plus, you should also learn about this 1 warning sign we've spotted with ARK Resources Holdings Berhad.

If these risks are making you reconsider your opinion on ARK Resources Holdings Berhad, explore our interactive list of high quality stocks to get an idea of what else is out there.

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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.