It's Down 33% But BCM Alliance Berhad (KLSE:BCMALL) Could Be Riskier Than It Looks

Unfortunately for some shareholders, the BCM Alliance Berhad (KLSE:BCMALL) share price has dived 33% in the last thirty days, prolonging recent pain. Instead of being rewarded, shareholders who have already held through the last twelve months are now sitting on a 33% share price drop.

Even after such a large drop in price, there still wouldn't be many who think BCM Alliance Berhad's price-to-sales (or "P/S") ratio of 0.2x is worth a mention when the median P/S in Malaysia's Trade Distributors industry is similar at about 0.6x. Although, it's not wise to simply ignore the P/S without explanation as investors may be disregarding a distinct opportunity or a costly mistake.

Check out our latest analysis for BCM Alliance Berhad

How Has BCM Alliance Berhad Performed Recently?

We'd have to say that with no tangible growth over the last year, BCM Alliance Berhad's revenue has been unimpressive. One possibility is that the P/S is moderate because investors think this benign revenue growth rate might not be enough to outperform the broader industry in the near future. Those who are bullish on BCM Alliance 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 BCM Alliance Berhad's earnings, revenue and cash flow.

How Is BCM Alliance Berhad's Revenue Growth Trending?

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

If we review the last year of revenue, the company posted a result that saw barely any deviation from a year ago. However, a few strong years before that means that it was still able to grow revenue by an impressive 39% in total over the last three years. Accordingly, shareholders will be pleased, but also have some questions to ponder about the last 12 months.

This is in contrast to the rest of the industry, which is expected to grow by 7.4% over the next year, materially lower than the company's recent medium-term annualised growth rates.

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.

The Final Word

With its share price dropping off a cliff, the P/S for BCM Alliance Berhad looks to be in line with the rest of the Trade Distributors industry. We'd say the price-to-sales ratio's power isn't primarily as a valuation instrument but rather to gauge current investor sentiment and future expectations.

We didn't quite envision BCM Alliance Berhad's P/S sitting in line with the wider industry, considering the revenue growth over the last three-year is higher than the current industry outlook. There could be some unobserved threats to revenue preventing the P/S ratio from matching this positive performance. It appears some 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 these 3 warning signs we've spotted with BCM Alliance Berhad.

If strong companies turning a profit tickle your fancy, then you'll want to check out this free list of interesting companies that trade on a low P/E (but have proven they can grow earnings).

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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.