There's No Escaping Destini Berhad's (KLSE:DESTINI) Muted Revenues

With a price-to-sales (or "P/S") ratio of 0.8x Destini Berhad (KLSE:DESTINI) may be sending very bullish signals at the moment, given that almost half of all the Aerospace & Defense companies in Malaysia have P/S ratios greater than 4.7x and even P/S higher than 12x are not unusual. However, the P/S might be quite low for a reason and it requires further investigation to determine if it's justified.

View our latest analysis for Destini Berhad

How Has Destini Berhad Performed Recently?

With revenue growth that's exceedingly strong of late, Destini Berhad has been doing very well. It might be that many expect the strong revenue performance to degrade substantially, which has repressed the P/S ratio. Those who are bullish on Destini 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 Destini Berhad's earnings, revenue and cash flow.

How Is Destini Berhad's Revenue Growth Trending?

The only time you'd be truly comfortable seeing a P/S as depressed as Destini Berhad's is when the company's growth is on track to lag the industry decidedly.

Retrospectively, the last year delivered an exceptional 58% gain to the company's top line. However, this wasn't enough as the latest three year period has seen the company endure a nasty 27% drop in revenue in aggregate. Therefore, it's fair to say the revenue growth recently has been undesirable for the company.

Comparing that to the industry, which is predicted to deliver 24% growth in the next 12 months, the company's downward momentum based on recent medium-term revenue results is a sobering picture.

With this information, we are not surprised that Destini Berhad is trading at a P/S lower than the industry. Nonetheless, there's no guarantee the P/S has reached a floor yet with revenue going in reverse. Even just maintaining these prices could be difficult to achieve as recent revenue trends are already weighing down the shares.

The Key Takeaway

While the price-to-sales ratio shouldn't be the defining factor in whether you buy a stock or not, it's quite a capable barometer of revenue expectations.

Our examination of Destini Berhad confirms that the company's shrinking revenue over the past medium-term is a key factor in its low price-to-sales ratio, given the industry is projected to grow. Right now shareholders are accepting the low P/S as they concede future revenue probably won't provide any pleasant surprises either. Unless the recent medium-term conditions improve, they will continue to form a barrier for the share price around these levels.

Don't forget that there may be other risks. For instance, we've identified 3 warning signs for Destini Berhad (1 shouldn't be ignored) you should be aware of.

If you're unsure about the strength of Destini 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.