PTT Synergy Group Berhad (KLSE:PTT) Looks Just Right With A 31% Price Jump

The PTT Synergy Group Berhad (KLSE:PTT) share price has done very well over the last month, posting an excellent gain of 31%. The last 30 days bring the annual gain to a very sharp 48%.

Following the firm bounce in price, you could be forgiven for thinking PTT Synergy Group Berhad is a stock not worth researching with a price-to-sales ratios (or "P/S") of 1.3x, considering almost half the companies in Malaysia's Trade Distributors industry have P/S ratios below 0.6x. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the elevated P/S.

View our latest analysis for PTT Synergy Group Berhad

How Has PTT Synergy Group Berhad Performed Recently?

PTT Synergy Group Berhad certainly has been doing a great job lately as it's been growing its revenue at a really rapid pace. The P/S ratio is probably high because investors think this strong revenue growth will be enough to outperform the broader industry in the near future. If not, then existing shareholders might be a little nervous about the viability 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 PTT Synergy Group Berhad's earnings, revenue and cash flow.

How Is PTT Synergy Group Berhad's Revenue Growth Trending?

There's an inherent assumption that a company should outperform the industry for P/S ratios like PTT Synergy Group Berhad's to be considered reasonable.

If we review the last year of revenue growth, the company posted a terrific increase of 43%. The latest three year period has also seen an incredible overall rise in revenue, aided by its incredible short-term performance. Therefore, it's fair to say the revenue growth recently has been superb for the company.

Comparing that to the industry, which is only predicted to deliver 7.0% growth in the next 12 months, the company's momentum is stronger based on recent medium-term annualised revenue results.

With this in consideration, it's not hard to understand why PTT Synergy Group Berhad's P/S is high relative to its industry peers. Presumably shareholders aren't keen to offload something they believe will continue to outmanoeuvre the wider industry.

The Final Word

PTT Synergy Group Berhad shares have taken a big step in a northerly direction, but its P/S is elevated as a result. 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.

As we suspected, our examination of PTT Synergy Group Berhad revealed its three-year revenue trends are contributing to its high P/S, given they look better than current industry expectations. Right now shareholders are comfortable with the P/S as they are quite confident revenue aren't under threat. Barring any significant changes to the company's ability to make money, the share price should continue to be propped up.

It is also worth noting that we have found 4 warning signs for PTT Synergy Group Berhad (3 are potentially serious!) that you need to take into consideration.

Of course, profitable companies with a history of great earnings growth are generally safer bets. So you may wish to see this free collection of other companies that have reasonable P/E ratios and have grown earnings strongly.

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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.