Revenues Working Against Ho Hup Construction Company Berhad's (KLSE:HOHUP) Share Price Following 29% Dive

To the annoyance of some shareholders, Ho Hup Construction Company Berhad (KLSE:HOHUP) shares are down a considerable 29% in the last month, which continues a horrid run for the company. For any long-term shareholders, the last month ends a year to forget by locking in a 51% share price decline.

Following the heavy fall in price, given about half the companies operating in Malaysia's Construction industry have price-to-sales ratios (or "P/S") above 0.9x, you may consider Ho Hup Construction Company Berhad as an attractive investment with its 0.3x P/S ratio. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the reduced P/S.

View our latest analysis for Ho Hup Construction Company Berhad

What Does Ho Hup Construction Company Berhad's P/S Mean For Shareholders?

As an illustration, revenue has deteriorated at Ho Hup Construction Company Berhad over the last year, which is not ideal at all. 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 Ho Hup Construction Company 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 Ho Hup Construction Company Berhad's earnings, revenue and cash flow.

How Is Ho Hup Construction Company Berhad's Revenue Growth Trending?

In order to justify its P/S ratio, Ho Hup Construction Company Berhad would need to produce sluggish growth that's trailing the industry.

In reviewing the last year of financials, we were disheartened to see the company's revenues fell to the tune of 12%. The last three years don't look nice either as the company has shrunk revenue by 41% 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 12% growth in the next 12 months, the company's downward momentum based on recent medium-term revenue results is a sobering picture.

In light of this, it's understandable that Ho Hup Construction Company Berhad's P/S would sit below the majority of other companies. 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 Bottom Line On Ho Hup Construction Company Berhad's P/S

The southerly movements of Ho Hup Construction Company Berhad's shares means its P/S is now sitting at a pretty low level. Typically, we'd caution against reading too much into price-to-sales ratios when settling on investment decisions, though it can reveal plenty about what other market participants think about the company.

As we suspected, our examination of Ho Hup Construction Company Berhad revealed its shrinking revenue over the medium-term is contributing to its low P/S, given the industry is set to grow. Right now shareholders are accepting the low P/S as they concede future revenue probably won't provide any pleasant surprises either. If recent medium-term revenue trends continue, it's hard to see the share price moving strongly in either direction in the near future under these circumstances.

We don't want to rain on the parade too much, but we did also find 5 warning signs for Ho Hup Construction Company Berhad (2 are significant!) that you need to be mindful of.

If these risks are making you reconsider your opinion on Ho Hup Construction Company 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.