Not Many Are Piling Into Widad Group Berhad (KLSE:WIDAD) Stock Yet As It Plummets 27%

The Widad Group Berhad (KLSE:WIDAD) share price has fared very poorly over the last month, falling by a substantial 27%. The recent drop completes a disastrous twelve months for shareholders, who are sitting on a 91% loss during that time.

Although its price has dipped substantially, you could still be forgiven for feeling indifferent about Widad Group Berhad's P/S ratio of 0.6x, since the median price-to-sales (or "P/S") ratio for the Construction industry in Malaysia is also close to 1.1x. However, investors might be overlooking a clear opportunity or potential setback if there is no rational basis for the P/S.

View our latest analysis for Widad Group Berhad

What Does Widad Group Berhad's Recent Performance Look Like?

Widad Group Berhad has been doing a good job lately as it's been growing revenue at a solid pace. It might be that many expect the respectable revenue performance to wane, which has kept the P/S from rising. 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 not quite in favour.

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

Is There Some Revenue Growth Forecasted For Widad Group Berhad?

In order to justify its P/S ratio, Widad Group Berhad would need to produce growth that's similar to the industry.

Retrospectively, the last year delivered an exceptional 15% gain to the company's top line. The latest three year period has also seen an excellent 152% overall rise in revenue, aided by its 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 19% growth in the next 12 months, the company's momentum is stronger based on recent medium-term annualised revenue results.

With this information, we find it interesting that Widad Group Berhad is trading at a fairly similar P/S compared to the industry. It may be that most investors are not convinced the company can maintain its recent growth rates.

The Bottom Line On Widad Group Berhad's P/S

With its share price dropping off a cliff, the P/S for Widad Group Berhad looks to be in line with the rest of the Construction 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.

To our surprise, Widad Group Berhad revealed its three-year revenue trends aren't contributing to its P/S as much as we would have predicted, given they look better than current industry expectations. 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. It appears some are indeed anticipating revenue instability, because the persistence of these recent medium-term conditions would normally provide a boost to the share price.

There are also other vital risk factors to consider and we've discovered 4 warning signs for Widad Group Berhad (3 are significant!) that you should be aware of before investing here.

If these risks are making you reconsider your opinion on Widad Group 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.