Market Might Still Lack Some Conviction On ARK Resources Holdings Berhad (KLSE:ARK) Even After 26% Share Price Boost

Despite an already strong run, ARK Resources Holdings Berhad (KLSE:ARK) shares have been powering on, with a gain of 26% in the last thirty days. The annual gain comes to 141% following the latest surge, making investors sit up and take notice.

Even after such a large jump in price, when close to half the companies operating in Malaysia's Construction industry have price-to-sales ratios (or "P/S") above 1x, you may still consider ARK Resources Holdings Berhad as an enticing stock to check out with its 0.4x P/S ratio. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the reduced P/S.

View our latest analysis for ARK Resources Holdings Berhad

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

ARK Resources Holdings Berhad certainly has been doing a great job lately as it's been growing its revenue at a really rapid pace. It might be that many expect the strong revenue performance to degrade substantially, which has repressed the P/S ratio. If that doesn't eventuate, then existing shareholders have reason to be quite optimistic about the future direction of the share price.

Although there are no analyst estimates available for ARK Resources Holdings Berhad, take a look at this free data-rich visualisation to see how the company stacks up on earnings, revenue and cash flow.

How Is ARK Resources Holdings Berhad's Revenue Growth Trending?

ARK Resources Holdings Berhad's P/S ratio would be typical for a company that's only expected to deliver limited growth, and importantly, perform worse than the industry.

If we review the last year of revenue growth, we see the company's revenues grew exponentially. 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.

When compared to the industry's one-year growth forecast of 12%, the most recent medium-term revenue trajectory is noticeably more alluring

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

The Final Word

ARK Resources Holdings Berhad's stock price has surged recently, but its but its P/S still remains modest. 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 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. At least price risks look to be very low if recent medium-term revenue trends continue, but investors seem to think future revenue could see a lot of volatility.

Having said that, be aware ARK Resources Holdings Berhad is showing 2 warning signs in our investment analysis, you should know about.

If you're unsure about the strength of ARK Resources Holdings Berhad's business, why not explore our interactive list of stocks with solid business fundamentals for some other companies you may have missed.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.