Bina Puri Holdings Bhd's (KLSE:BPURI) 28% Dip Still Leaving Some Shareholders Feeling Restless Over Its P/SRatio

Bina Puri Holdings Bhd (KLSE:BPURI) shareholders that were waiting for something to happen have been dealt a blow with a 28% share price drop in the last month. The drop over the last 30 days has capped off a tough year for shareholders, with the share price down 36% in that time.

Although its price has dipped substantially, it's still not a stretch to say that Bina Puri Holdings Bhd's price-to-sales (or "P/S") ratio of 1.1x right now seems quite "middle-of-the-road" compared to the Construction industry in Malaysia, where the median P/S ratio is around 1x. 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.

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Check out our latest analysis for Bina Puri Holdings Bhd

How Has Bina Puri Holdings Bhd Performed Recently?

Recent times have been quite advantageous for Bina Puri Holdings Bhd as its revenue has been rising very briskly. It might be that many expect the strong revenue performance to wane, which has kept the share price, and thus the P/S ratio, from rising. Those who are bullish on Bina Puri Holdings Bhd will be hoping that this isn't the case, so that they can pick up the stock at a lower valuation.

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What Are Revenue Growth Metrics Telling Us About The P/S?

In order to justify its P/S ratio, Bina Puri Holdings Bhd would need to produce growth that's similar to the industry.

If we review the last year of revenue growth, the company posted a terrific increase of 67%. Still, revenue has fallen 25% in total from three years ago, which is quite disappointing. So unfortunately, we have to acknowledge that the company has not done a great job of growing revenues over that time.

Weighing that medium-term revenue trajectory against the broader industry's one-year forecast for expansion of 23% shows it's an unpleasant look.

With this in mind, we find it worrying that Bina Puri Holdings Bhd's P/S exceeds that of its industry peers. It seems most investors are ignoring the recent poor growth rate and are hoping for a turnaround in the company's business prospects. Only the boldest would assume these prices are sustainable as a continuation of recent revenue trends is likely to weigh on the share price eventually.

What Does Bina Puri Holdings Bhd's P/S Mean For Investors?

Bina Puri Holdings Bhd's plummeting stock price has brought its P/S back to a similar region as the rest of the industry. 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 look at Bina Puri Holdings Bhd revealed its shrinking revenues over the medium-term haven't impacted the P/S as much as we anticipated, given the industry is set to grow. When we see revenue heading backwards in the context of growing industry forecasts, it'd make sense to expect a possible share price decline on the horizon, sending the moderate P/S lower. Unless the recent medium-term conditions improve markedly, investors will have a hard time accepting the share price as fair value.

Having said that, be aware Bina Puri Holdings Bhd is showing 5 warning signs in our investment analysis, and 1 of those is a bit unpleasant.

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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.