Investors Aren't Entirely Convinced By Velocity Capital Partner Berhad's (KLSE:VELOCITY) Revenues

It's not a stretch to say that Velocity Capital Partner Berhad's (KLSE:VELOCITY) price-to-sales (or "P/S") ratio of 1.2x seems quite "middle-of-the-road" for Consumer Durables companies in Malaysia, seeing as it matches the P/S ratio of the wider industry. 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.

View our latest analysis for Velocity Capital Partner Berhad

How Velocity Capital Partner Berhad Has Been Performing

With revenue growth that's exceedingly strong of late, Velocity Capital Partner Berhad has been doing very well. It might be that many expect the strong revenue performance to wane, which has kept the share price, and thus the P/S ratio, from rising. Those who are bullish on Velocity Capital Partner Berhad will be hoping that this isn't the case, so that they can pick up the stock at a lower valuation.

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 Velocity Capital Partner Berhad's earnings, revenue and cash flow.

Is There Some Revenue Growth Forecasted For Velocity Capital Partner Berhad?

There's an inherent assumption that a company should be matching the industry for P/S ratios like Velocity Capital Partner Berhad's to be considered reasonable.

Retrospectively, the last year delivered an exceptional 45% gain to the company's top line. This great performance means it was also able to deliver immense revenue growth over the last three years. Accordingly, shareholders would have been over the moon with those medium-term rates of revenue growth.

Comparing that recent medium-term revenue trajectory with the industry's one-year growth forecast of 23% shows it's noticeably more attractive.

With this information, we find it interesting that Velocity Capital Partner Berhad is trading at a fairly similar P/S compared to the industry. Apparently some shareholders believe the recent performance is at its limits and have been accepting lower selling prices.

The Final Word

Using the price-to-sales ratio alone to determine if you should sell your stock isn't sensible, however it can be a practical guide to the company's future prospects.

We didn't quite envision Velocity Capital Partner Berhad's P/S sitting in line with the wider industry, considering the revenue growth over the last three-year is higher than the current industry outlook. It'd be fair to assume that potential risks the company faces could be the contributing factor to the lower than expected P/S. While recent revenue trends over the past medium-term suggest that the risk of a price decline is low, investors appear to see the likelihood of revenue fluctuations in the future.

You should always think about risks. Case in point, we've spotted 3 warning signs for Velocity Capital Partner Berhad you should be aware of, and 2 of them are a bit unpleasant.

If strong companies turning a profit tickle your fancy, then you'll want to check out this free list of interesting companies that trade on a low P/E (but have proven they can grow earnings).

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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.