BCM Alliance Berhad's (KLSE:BCMALL) Shares Leap 33% Yet They're Still Not Telling The Full Story

BCM Alliance Berhad (KLSE:BCMALL) shareholders have had their patience rewarded with a 33% share price jump in the last month. Longer-term shareholders would be thankful for the recovery in the share price since it's now virtually flat for the year after the recent bounce.

Even after such a large jump in price, it's still not a stretch to say that BCM Alliance Berhad's price-to-sales (or "P/S") ratio of 0.4x right now seems quite "middle-of-the-road" compared to the Trade Distributors industry in Malaysia, where the median P/S ratio is around 0.5x. However, investors might be overlooking a clear opportunity or potential setback if there is no rational basis for the P/S.

Check out our latest analysis for BCM Alliance Berhad

How BCM Alliance Berhad Has Been Performing

Revenue has risen at a steady rate over the last year for BCM Alliance Berhad, which is generally not a bad outcome. It might be that many expect the respectable revenue performance to only match most other companies over the coming period, which has kept the P/S from rising. If you like the company, you'd be hoping this isn't the case so that you could potentially pick up some stock while it's not quite in favour.

Want the full picture on earnings, revenue and cash flow for the company? Then our free report on BCM Alliance Berhad will help you shine a light on its historical performance.

How Is BCM Alliance Berhad's Revenue Growth Trending?

The only time you'd be comfortable seeing a P/S like BCM Alliance Berhad's is when the company's growth is tracking the industry closely.

Retrospectively, the last year delivered a decent 6.0% gain to the company's revenues. This was backed up an excellent period prior to see revenue up by 34% in total over the last three years. Therefore, it's fair to say the revenue growth recently has been superb for the company.

When compared to the industry's one-year growth forecast of 3.0%, the most recent medium-term revenue trajectory is noticeably more alluring

With this information, we find it interesting that BCM Alliance Berhad is trading at a fairly similar P/S compared to the industry. Apparently some shareholders believe the recent performance is at its limits and have been accepting lower selling prices.

What Does BCM Alliance Berhad's P/S Mean For Investors?

Its shares have lifted substantially and now BCM Alliance Berhad's P/S is back within range of the industry median. Typically, we'd caution against reading too much into price-to-sales ratios when settling on investment decisions, though it can reveal plenty about what other market participants think about the company.

To our surprise, BCM Alliance Berhad revealed its three-year revenue trends aren't contributing to its P/S as much as we would have predicted, given they look better than current industry expectations. It'd be fair to assume that potential risks the company faces could be the contributing factor to the lower than expected P/S. While recent revenue trends over the past medium-term suggest that the risk of a price decline is low, investors appear to see the likelihood of revenue fluctuations in the future.

And what about other risks? Every company has them, and we've spotted 3 warning signs for BCM Alliance Berhad you should know about.

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.