There's No Escaping Protasco Berhad's (KLSE:PRTASCO) Muted Revenues Despite A 49% Share Price Rise

Protasco Berhad (KLSE:PRTASCO) shareholders would be excited to see that the share price has had a great month, posting a 49% gain and recovering from prior weakness. Looking back a bit further, it's encouraging to see the stock is up 33% in the last year.

Even after such a large jump in price, Protasco Berhad's price-to-sales (or "P/S") ratio of 0.1x might still make it look like a buy right now compared to the Construction industry in Malaysia, where around half of the companies have P/S ratios above 0.9x and even P/S above 3x are quite common. 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 Protasco Berhad

How Protasco Berhad Has Been Performing

The recent revenue growth at Protasco Berhad would have to be considered satisfactory if not spectacular. One possibility is that the P/S ratio is low because investors think this good revenue growth might actually underperform the broader industry in the near future. 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.

Want the full picture on earnings, revenue and cash flow for the company? Then our free report on Protasco Berhad will help you shine a light on its historical performance.

Is There Any Revenue Growth Forecasted For Protasco Berhad?

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

If we review the last year of revenue growth, the company posted a worthy increase of 4.5%. Revenue has also lifted 16% in aggregate from three years ago, partly thanks to the last 12 months of growth. Therefore, it's fair to say the revenue growth recently has been respectable for the company.

This is in contrast to the rest of the industry, which is expected to grow by 17% over the next year, materially higher than the company's recent medium-term annualised growth rates.

With this information, we can see why Protasco Berhad is trading at a P/S lower than the industry. Apparently many shareholders weren't comfortable holding on to something they believe will continue to trail the wider industry.

The Key Takeaway

The latest share price surge wasn't enough to lift Protasco Berhad's P/S close to the industry median. We'd say the price-to-sales ratio's power isn't primarily as a valuation instrument but rather to gauge current investor sentiment and future expectations.

Our examination of Protasco Berhad confirms that the company's revenue trends over the past three-year years are a key factor in its low price-to-sales ratio, as we suspected, given they fall short of current industry expectations. At this stage investors feel the potential for an improvement in revenue isn't great enough to justify a higher P/S ratio. Unless the recent medium-term conditions improve, they will continue to form a barrier for the share price around these levels.

We don't want to rain on the parade too much, but we did also find 2 warning signs for Protasco Berhad (1 doesn't sit too well with us!) that you need to be mindful of.

If companies with solid past earnings growth is up your alley, you may wish to see this free collection of other companies with strong earnings growth and low P/E ratios.

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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.