Even With A 50% Surge, Cautious Investors Are Not Rewarding BCM Alliance Berhad's (KLSE:BCMALL) Performance Completely

BCM Alliance Berhad (KLSE:BCMALL) shares have had a really impressive month, gaining 50% after a shaky period beforehand. Unfortunately, the gains of the last month did little to right the losses of the last year with the stock still down 25% over that time.

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 0.6x. While this might not raise any eyebrows, if the P/S ratio is not justified investors could be missing out on a potential opportunity or ignoring looming disappointment.

Check out our latest analysis for BCM Alliance Berhad

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

As an illustration, revenue has deteriorated at BCM Alliance Berhad over the last year, which is not ideal at all. Perhaps investors believe the recent revenue performance is enough to keep in line with the industry, which is keeping the P/S from dropping off. If you like the company, you'd at least be hoping this is the case so that you could potentially pick up some stock while it's not quite in favour.

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

Is There Some Revenue Growth Forecasted For BCM Alliance Berhad?

BCM Alliance Berhad's P/S ratio would be typical for a company that's only expected to deliver moderate growth, and importantly, perform in line with the industry.

Retrospectively, the last year delivered a frustrating 17% decrease to the company's top line. Regardless, revenue has managed to lift by a handy 27% in aggregate from three years ago, thanks to the earlier period of growth. Although it's been a bumpy ride, it's still fair to say the revenue growth recently has been mostly respectable for the company.

Comparing that to the industry, which is only predicted to deliver 3.1% growth in the next 12 months, the company's momentum is stronger based on recent medium-term annualised revenue results.

In light of this, it's curious that BCM Alliance Berhad's P/S sits in line with the majority of other companies. Apparently some shareholders believe the recent performance is at its limits and have been accepting lower selling prices.

What We Can Learn From BCM Alliance Berhad's P/S?

Its shares have lifted substantially and now BCM Alliance Berhad's P/S is back within range of the industry median. 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.

We've established that BCM Alliance Berhad currently trades on a lower than expected P/S since its recent three-year growth is higher than the wider industry forecast. 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.

It is also worth noting that we have found 3 warning signs for BCM Alliance Berhad that you need to take into consideration.

If these risks are making you reconsider your opinion on BCM Alliance 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.