Little Excitement Around Euro Holdings Berhad's (KLSE:EURO) Revenues As Shares Take 28% Pounding

The Euro Holdings Berhad (KLSE:EURO) share price has fared very poorly over the last month, falling by a substantial 28%. The drop over the last 30 days has capped off a tough year for shareholders, with the share price down 19% in that time.

Since its price has dipped substantially, given about half the companies operating in Malaysia's Commercial Services industry have price-to-sales ratios (or "P/S") above 1.7x, you may consider Euro Holdings Berhad as an attractive investment with its 1.1x P/S ratio. However, the P/S might be low for a reason and it requires further investigation to determine if it's justified.

See our latest analysis for Euro Holdings Berhad

What Does Euro Holdings Berhad's P/S Mean For Shareholders?

For instance, Euro Holdings Berhad's receding revenue in recent times would have to be some food for thought. It might be that many expect the disappointing revenue performance to continue or accelerate, which has repressed the P/S. Those who are bullish on Euro Holdings 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 Euro Holdings Berhad will help you shine a light on its historical performance.

Is There Any Revenue Growth Forecasted For Euro Holdings Berhad?

Euro Holdings Berhad's P/S ratio would be typical for a company that's only expected to deliver limited growth, and importantly, perform worse than the industry.

Taking a look back first, the company's revenue growth last year wasn't something to get excited about as it posted a disappointing decline of 47%. As a result, revenue from three years ago have also fallen 5.8% overall. So unfortunately, we have to acknowledge that the company has not done a great job of growing revenue over that time.

Comparing that to the industry, which is predicted to deliver 14% growth in the next 12 months, the company's downward momentum based on recent medium-term revenue results is a sobering picture.

With this in mind, we understand why Euro Holdings Berhad's P/S is lower than most of its industry peers. However, we think shrinking revenues are unlikely to lead to a stable P/S over the longer term, which could set up shareholders for future disappointment. There's potential for the P/S to fall to even lower levels if the company doesn't improve its top-line growth.

The Bottom Line On Euro Holdings Berhad's P/S

The southerly movements of Euro Holdings Berhad's shares means its P/S is now sitting at a pretty low level. 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.

It's no surprise that Euro Holdings Berhad maintains its low P/S off the back of its sliding revenue over the medium-term. Right now shareholders are accepting the low P/S as they concede future revenue probably won't provide any pleasant surprises either. If recent medium-term revenue trends continue, it's hard to see the share price moving strongly in either direction in the near future under these circumstances.

It is also worth noting that we have found 5 warning signs for Euro Holdings Berhad (2 are significant!) that you need to take into consideration.

If these risks are making you reconsider your opinion on Euro Holdings 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.