Investors Still Aren't Entirely Convinced By Infraharta Holdings Berhad's (KLSE:IHB) Revenues Despite 29% Price Jump

Infraharta Holdings Berhad (KLSE:IHB) shares have had a really impressive month, gaining 29% after a shaky period beforehand. Not all shareholders will be feeling jubilant, since the share price is still down a very disappointing 19% in the last twelve months.

Although its price has surged higher, it's still not a stretch to say that Infraharta Holdings Berhad's price-to-sales (or "P/S") ratio of 0.9x right now seems quite "middle-of-the-road" compared to the Construction industry in Malaysia, where the median P/S ratio is around 1x. While this might not raise any eyebrows, if the P/S ratio is not justified investors could be missing out on a potential opportunity or ignoring looming disappointment.

See our latest analysis for Infraharta Holdings Berhad

How Infraharta Holdings Berhad Has Been Performing

Infraharta Holdings Berhad has been doing a good job lately as it's been growing revenue at a solid pace. One possibility is that the P/S is moderate because investors think this respectable revenue growth might not be enough to outperform the broader industry in the near future. If that doesn't eventuate, then existing shareholders probably aren't too pessimistic about the future direction of the share price.

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 Infraharta Holdings Berhad's earnings, revenue and cash flow.

Is There Some Revenue Growth Forecasted For Infraharta Holdings Berhad?

There's an inherent assumption that a company should be matching the industry for P/S ratios like Infraharta Holdings Berhad's to be considered reasonable.

If we review the last year of revenue growth, the company posted a worthy increase of 13%. This was backed up an excellent period prior to see revenue up by 146% in total over the last three years. Therefore, it's fair to say the revenue growth recently has been superb for the company.

Comparing that recent medium-term revenue trajectory with the industry's one-year growth forecast of 20% shows it's noticeably more attractive.

In light of this, it's curious that Infraharta Holdings Berhad's P/S sits in line with the majority of other companies. Apparently some shareholders believe the recent performance is at its limits and have been accepting lower selling prices.

What We Can Learn From Infraharta Holdings Berhad's P/S?

Infraharta Holdings Berhad's stock has a lot of momentum behind it lately, which has brought its P/S level with the rest of the industry. Generally, our preference is to limit the use of the price-to-sales ratio to establishing what the market thinks about the overall health of a company.

We've established that Infraharta Holdings Berhad currently trades on a 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 can only assume potential risks are what might be placing 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 see the likelihood of revenue fluctuations in the future.

It is also worth noting that we have found 4 warning signs for Infraharta Holdings Berhad (2 are concerning!) that you need to take into consideration.

It's important to make sure you look for a great company, not just the first idea you come across. So if growing profitability aligns with your idea of a great company, take a peek at this free list of interesting companies with strong recent earnings growth (and a low P/E).

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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.