There's No Escaping Ecobuilt Holdings Berhad's (KLSE:ECOHLDS) Muted Revenues

When you see that almost half of the companies in the Construction industry in Malaysia have price-to-sales ratios (or "P/S") above 1x, Ecobuilt Holdings Berhad (KLSE:ECOHLDS) looks to be giving off some buy signals with its 0.2x P/S ratio. However, the P/S might be low for a reason and it requires further investigation to determine if it's justified.

Check out our latest analysis for Ecobuilt Holdings Berhad

What Does Ecobuilt Holdings Berhad's P/S Mean For Shareholders?

For instance, Ecobuilt Holdings Berhad's receding revenue in recent times would have to be some food for thought. Perhaps the market believes the recent revenue performance isn't good enough to keep up the industry, causing the P/S ratio to suffer. Those who are bullish on Ecobuilt Holdings 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 Ecobuilt Holdings Berhad's earnings, revenue and cash flow.

Is There Any Revenue Growth Forecasted For Ecobuilt Holdings Berhad?

In order to justify its P/S ratio, Ecobuilt Holdings Berhad would need to produce sluggish growth that's trailing the industry.

Retrospectively, the last year delivered a frustrating 1.7% decrease to the company's top line. Even so, admirably revenue has lifted 42% in aggregate from three years ago, notwithstanding the last 12 months. Although it's been a bumpy ride, it's still fair to say the revenue growth recently has been more than adequate for the company.

Comparing the recent medium-term revenue trends against the industry's one-year growth forecast of 34% shows it's noticeably less attractive.

With this in consideration, it's easy to understand why Ecobuilt Holdings Berhad's P/S falls short of the mark set by its industry peers. It seems most investors are expecting to see the recent limited growth rates continue into the future and are only willing to pay a reduced amount for the stock.

The Final Word

It's argued the price-to-sales ratio is an inferior measure of value within certain industries, but it can be a powerful business sentiment indicator.

In line with expectations, Ecobuilt Holdings Berhad maintains its low P/S on the weakness of its recent three-year growth being lower than the wider industry forecast. Right now shareholders are accepting the low P/S as they concede future revenue probably won't provide any pleasant surprises. If recent medium-term revenue trends continue, it's hard to see the share price experience a reversal of fortunes anytime soon.

Before you take the next step, you should know about the 4 warning signs for Ecobuilt Holdings Berhad (3 make us uncomfortable!) that we have uncovered.

If these risks are making you reconsider your opinion on Ecobuilt Holdings 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.