Investors Give Focus Dynamics Group Berhad (KLSE:FOCUS) Shares A 40% Hiding

Focus Dynamics Group Berhad (KLSE:FOCUS) shareholders won't be pleased to see that the share price has had a very rough month, dropping 40% and undoing the prior period's positive performance. Still, a bad month hasn't completely ruined the past year with the stock gaining 50%, which is great even in a bull market.

Although its price has dipped substantially, it's still not a stretch to say that Focus Dynamics Group Berhad's price-to-sales (or "P/S") ratio of 1x right now seems quite "middle-of-the-road" compared to the Hospitality industry in Malaysia, where the median P/S ratio is around 1.3x. 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 Focus Dynamics Group Berhad

How Focus Dynamics Group Berhad Has Been Performing

Recent times have been quite advantageous for Focus Dynamics Group Berhad as its revenue has been rising very briskly. The P/S is probably moderate because investors think this strong revenue growth might not be enough to outperform the broader industry in the near future. If you like the company, you'd be hoping this isn't the case so that you could potentially pick up some stock while it's not quite in favour.

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

Is There Some Revenue Growth Forecasted For Focus Dynamics Group Berhad?

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

Retrospectively, the last year delivered an exceptional 39% gain to the company's top line. Revenue has also lifted 22% in aggregate from three years ago, mostly thanks to the last 12 months of growth. So we can start by confirming that the company has actually done a good job of growing revenue over that time.

Comparing that to the industry, which is only predicted to deliver 4.2% growth in the next 12 months, the company's momentum is stronger based on recent medium-term annualised revenue results.

With this information, we find it interesting that Focus Dynamics Group Berhad is trading at a fairly similar P/S compared to the industry. It may be that most investors are not convinced the company can maintain its recent growth rates.

What We Can Learn From Focus Dynamics Group Berhad's P/S?

Focus Dynamics Group Berhad's plummeting stock price has brought its P/S back to a similar region as the rest of the industry. It's argued the price-to-sales ratio is an inferior measure of value within certain industries, but it can be a powerful business sentiment indicator.

We didn't quite envision Focus Dynamics Group 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. There could be some unobserved threats to revenue preventing the P/S ratio from matching this positive performance. At least the risk of a price drop looks to be subdued if recent medium-term revenue trends continue, but investors seem to think future revenue could see some volatility.

Before you take the next step, you should know about the 3 warning signs for Focus Dynamics Group Berhad (2 are potentially serious!) that we have uncovered.

If these risks are making you reconsider your opinion on Focus Dynamics Group 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.