Positive Sentiment Still Eludes Boustead Heavy Industries Corporation Berhad (KLSE:BHIC) Following 40% Share Price Slump

Boustead Heavy Industries Corporation Berhad (KLSE:BHIC) shareholders that were waiting for something to happen have been dealt a blow with a 40% share price drop in the last month. For any long-term shareholders, the last month ends a year to forget by locking in a 53% share price decline.

Since its price has dipped substantially, Boustead Heavy Industries Corporation Berhad may be sending buy signals at present with its price-to-sales (or "P/S") ratio of 0.7x, considering almost half of all companies in the Machinery industry in Malaysia have P/S ratios greater than 1.6x and even P/S higher than 4x aren't out of the ordinary. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's limited.

Check out our latest analysis for Boustead Heavy Industries Corporation Berhad

What Does Boustead Heavy Industries Corporation Berhad's P/S Mean For Shareholders?

Recent times have been quite advantageous for Boustead Heavy Industries Corporation Berhad as its revenue has been rising very briskly. It might be that many expect the strong revenue performance to degrade substantially, which has repressed the P/S ratio. 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 out of favour.

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 Boustead Heavy Industries Corporation Berhad's earnings, revenue and cash flow.

How Is Boustead Heavy Industries Corporation Berhad's Revenue Growth Trending?

The only time you'd be truly comfortable seeing a P/S as low as Boustead Heavy Industries Corporation Berhad's is when the company's growth is on track to lag the industry.

Retrospectively, the last year delivered an exceptional 83% gain to the company's top line. Pleasingly, revenue has also lifted 58% in aggregate from three years ago, thanks to the last 12 months of growth. Accordingly, shareholders would have definitely welcomed those medium-term rates of revenue growth.

This is in contrast to the rest of the industry, which is expected to grow by 14% over the next year, materially lower than the company's recent medium-term annualised growth rates.

In light of this, it's peculiar that Boustead Heavy Industries Corporation 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.

What We Can Learn From Boustead Heavy Industries Corporation Berhad's P/S?

Boustead Heavy Industries Corporation Berhad's P/S has taken a dip along with its share price. 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're very surprised to see Boustead Heavy Industries Corporation Berhad currently trading on a much lower than expected P/S since its recent three-year growth is higher than the wider industry forecast. When we see strong revenue with faster-than-industry growth, we assume there are some significant underlying risks to the company's ability to make money which is applying downwards pressure on the P/S ratio. While recent revenue trends over the past medium-term suggest that the risk of a price decline is low, investors appear to perceive a likelihood of revenue fluctuations in the future.

You need to take note of risks, for example - Boustead Heavy Industries Corporation Berhad has 4 warning signs (and 3 which are potentially serious) we think you should know about.

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

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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.