Some Confidence Is Lacking In YBS International Berhad's (KLSE:YBS) P/S

It's not a stretch to say that YBS International Berhad's (KLSE:YBS) price-to-sales (or "P/S") ratio of 1.7x right now seems quite "middle-of-the-road" for companies in the Machinery industry in Malaysia, where the median P/S ratio is around 1.6x. Although, it's not wise to simply ignore the P/S without explanation as investors may be disregarding a distinct opportunity or a costly mistake.

See our latest analysis for YBS International Berhad

How Has YBS International Berhad Performed Recently?

Revenue has risen firmly for YBS International Berhad recently, which is pleasing to see. It might be that many expect the respectable revenue performance to wane, which has kept the P/S from rising. Those who are bullish on YBS International Berhad will be hoping that this isn't the case, so that they can pick up the stock at a lower valuation.

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

How Is YBS International Berhad's Revenue Growth Trending?

The only time you'd be comfortable seeing a P/S like YBS International Berhad's is when the company's growth is tracking the industry closely.

Retrospectively, the last year delivered an exceptional 27% gain to the company's top line. The latest three year period has also seen an excellent 59% 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.

This is in contrast to the rest of the industry, which is expected to grow by 19% over the next year, materially higher than the company's recent medium-term annualised growth rates.

In light of this, it's curious that YBS International Berhad's P/S sits in line with the majority of other companies. Apparently many investors in the company are less bearish than recent times would indicate and aren't willing to let go of their stock right now. They may be setting themselves up for future disappointment if the P/S falls to levels more in line with recent growth rates.

What Does YBS International Berhad's P/S Mean For Investors?

Typically, we'd caution against reading too much into price-to-sales ratios when settling on investment decisions, though it can reveal plenty about what other market participants think about the company.

Our examination of YBS International Berhad revealed its poor three-year revenue trends aren't resulting in a lower P/S as per our expectations, given they look worse than current industry outlook. When we see weak revenue with slower than industry growth, we suspect the share price is at risk of declining, bringing the P/S back in line with expectations. Unless there is a significant improvement in the company's medium-term performance, it will be difficult to prevent the P/S ratio from declining to a more reasonable level.

It's always necessary to consider the ever-present spectre of investment risk. We've identified 4 warning signs with YBS International Berhad (at least 2 which are significant), and understanding these should be part of your investment process.

If you're unsure about the strength of YBS International Berhad's business, why not explore our interactive list of stocks with solid business fundamentals for some other companies you may have missed.

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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.