AwanBiru Technology Berhad (KLSE:AWANTEC) Shares May Have Slumped 58% But Getting In Cheap Is Still Unlikely

The AwanBiru Technology Berhad (KLSE:AWANTEC) share price has fared very poorly over the last month, falling by a substantial 58%. For any long-term shareholders, the last month ends a year to forget by locking in a 64% share price decline.

Although its price has dipped substantially, there still wouldn't be many who think AwanBiru Technology Berhad's price-to-sales (or "P/S") ratio of 3x is worth a mention when the median P/S in Malaysia's Consumer Services industry is similar at about 2.9x. While this might not raise any eyebrows, if the P/S ratio is not justified investors could be missing out on a potential opportunity or ignoring looming disappointment.

Check out our latest analysis for AwanBiru Technology Berhad

How AwanBiru Technology Berhad Has Been Performing

As an illustration, revenue has deteriorated at AwanBiru Technology Berhad over the last year, which is not ideal at all. Perhaps investors believe the recent revenue performance is enough to keep in line with the industry, which is keeping the P/S from dropping off. If you like the company, you'd at least be hoping this is the case so that you could potentially pick up some stock while it's not quite in favour.

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 AwanBiru Technology Berhad's earnings, revenue and cash flow.

What Are Revenue Growth Metrics Telling Us About The P/S?

AwanBiru Technology Berhad's P/S ratio would be typical for a company that's only expected to deliver moderate growth, and importantly, perform in line with the industry.

Retrospectively, the last year delivered a frustrating 43% decrease to the company's top line. This means it has also seen a slide in revenue over the longer-term as revenue is down 70% in total over the last three years. So unfortunately, we have to acknowledge that the company has not done a great job of growing revenue over that time.

In contrast to the company, the rest of the industry is expected to grow by 37% over the next year, which really puts the company's recent medium-term revenue decline into perspective.

With this information, we find it concerning that AwanBiru Technology Berhad is trading at a fairly similar P/S compared to the industry. Apparently many investors in the company are way less bearish than recent times would indicate and aren't willing to let go of their stock right now. There's a good chance existing shareholders are setting themselves up for future disappointment if the P/S falls to levels more in line with the recent negative growth rates.

The Bottom Line On AwanBiru Technology Berhad's P/S

Following AwanBiru Technology Berhad's share price tumble, its P/S is just clinging on to the industry median P/S. 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.

Our look at AwanBiru Technology Berhad revealed its shrinking revenues over the medium-term haven't impacted the P/S as much as we anticipated, given the industry is set to grow. When we see revenue heading backwards in the context of growing industry forecasts, it'd make sense to expect a possible share price decline on the horizon, sending the moderate P/S lower. Unless the recent medium-term conditions improve markedly, investors will have a hard time accepting the share price as fair value.

And what about other risks? Every company has them, and we've spotted 3 warning signs for AwanBiru Technology Berhad (of which 2 shouldn't be ignored!) you should know about.

If you're unsure about the strength of AwanBiru Technology 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.