There's No Escaping Kimlun Corporation Berhad's (KLSE:KIMLUN) Muted Revenues Despite A 25% Share Price Rise

Kimlun Corporation Berhad (KLSE:KIMLUN) shareholders would be excited to see that the share price has had a great month, posting a 25% gain and recovering from prior weakness. Not all shareholders will be feeling jubilant, since the share price is still down a very disappointing 23% in the last twelve months.

Even after such a large jump in price, it would still be understandable if you think Kimlun Corporation Berhad is a stock with good investment prospects with a price-to-sales ratios (or "P/S") of 0.3x, considering almost half the companies in Malaysia's Construction industry have P/S ratios above 0.9x. However, the P/S might be low for a reason and it requires further investigation to determine if it's justified.

Our free stock report includes 2 warning signs investors should be aware of before investing in Kimlun Corporation Berhad. Read for free now.

Check out our latest analysis for Kimlun Corporation Berhad

How Has Kimlun Corporation Berhad Performed Recently?

With revenue growth that's superior to most other companies of late, Kimlun Corporation Berhad has been doing relatively well. One possibility is that the P/S ratio is low because investors think this strong revenue performance might be less impressive moving forward. If you like the company, you'd be hoping this isn't the case so that you could potentially pick up some stock while it's out of favour.

If you'd like to see what analysts are forecasting going forward, you should check out our free report on Kimlun Corporation Berhad.

Is There Any Revenue Growth Forecasted For Kimlun Corporation Berhad?

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

Retrospectively, the last year delivered an exceptional 42% gain to the company's top line. The strong recent performance means it was also able to grow revenue by 75% in total over the last three years. Therefore, it's fair to say the revenue growth recently has been superb for the company.

Turning to the outlook, the next year should generate growth of 0.2% as estimated by the three analysts watching the company. Meanwhile, the rest of the industry is forecast to expand by 23%, which is noticeably more attractive.

With this information, we can see why Kimlun Corporation Berhad is trading at a P/S lower than the industry. It seems most investors are expecting to see limited future growth and are only willing to pay a reduced amount for the stock.

The Bottom Line On Kimlun Corporation Berhad's P/S

Despite Kimlun Corporation Berhad's share price climbing recently, its P/S still lags most other companies. 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.

As we suspected, our examination of Kimlun Corporation Berhad's analyst forecasts revealed that its inferior revenue outlook is contributing to its low P/S. Shareholders' pessimism on the revenue prospects for the company seems to be the main contributor to the depressed P/S. It's hard to see the share price rising strongly in the near future under these circumstances.

It is also worth noting that we have found 2 warning signs for Kimlun Corporation Berhad (1 shouldn't be ignored!) that you need to take into consideration.

If these risks are making you reconsider your opinion on Kimlun Corporation Berhad, explore our interactive list of high quality stocks to get an idea of what else is out there.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.