Berjaya Land Berhad (KLSE:BJLAND) Soars 32% But It's A Story Of Risk Vs Reward

The Berjaya Land Berhad (KLSE:BJLAND) share price has done very well over the last month, posting an excellent gain of 32%. The last 30 days bring the annual gain to a very sharp 32%.

In spite of the firm bounce in price, Berjaya Land Berhad may still be sending buy signals at present with its price-to-sales (or "P/S") ratio of 0.2x, considering almost half of all companies in the Hospitality industry in Malaysia have P/S ratios greater than 1.5x and even P/S higher than 4x aren't out of the ordinary. 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 Berjaya Land Berhad

What Does Berjaya Land Berhad's Recent Performance Look Like?

Berjaya Land Berhad has been doing a good job lately as it's been growing revenue at a solid pace. Perhaps the market is expecting this acceptable revenue performance to take a dive, which has kept the P/S suppressed. If that doesn't eventuate, then existing shareholders have reason to be optimistic about the future direction of the share price.

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

Is There Any Revenue Growth Forecasted For Berjaya Land Berhad?

In order to justify its P/S ratio, Berjaya Land Berhad would need to produce sluggish growth that's trailing the industry.

Taking a look back first, we see that the company managed to grow revenues by a handy 12% last year. Pleasingly, revenue has also lifted 50% in aggregate from three years ago, partly thanks to the last 12 months of growth. Accordingly, shareholders would have definitely welcomed those medium-term rates of revenue growth.

Comparing that recent medium-term revenue trajectory with the industry's one-year growth forecast of 4.8% shows it's noticeably more attractive.

With this in mind, we find it intriguing that Berjaya Land Berhad's P/S isn't as high compared to that of its industry peers. Apparently some shareholders believe the recent performance has exceeded its limits and have been accepting significantly lower selling prices.

The Key Takeaway

Berjaya Land Berhad's stock price has surged recently, but its but its P/S still remains modest. 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 examination of Berjaya Land Berhad revealed its three-year revenue trends aren't boosting its P/S anywhere near 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 assume there are some significant underlying risks to the company's ability to make money which is applying downwards pressure on the P/S ratio. At least price risks look to be very low if recent medium-term revenue trends continue, but investors seem to think future revenue could see a lot of volatility.

Don't forget that there may be other risks. For instance, we've identified 2 warning signs for Berjaya Land Berhad (1 can't be ignored) you should be aware of.

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.