Investors Still Aren't Entirely Convinced By Focus Dynamics Group Berhad's (KLSE:FOCUS) Revenues Despite 33% Price Jump

Despite an already strong run, Focus Dynamics Group Berhad (KLSE:FOCUS) shares have been powering on, with a gain of 33% in the last thirty days. Looking back a bit further, it's encouraging to see the stock is up 33% in the last year.

Although its price has surged higher, there still wouldn't be many who think Focus Dynamics Group Berhad's price-to-sales (or "P/S") ratio of 1.4x is worth a mention when the median P/S in Malaysia's Hospitality industry is similar at about 1.6x. 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.

Check out our latest analysis for Focus Dynamics Group Berhad

What Does Focus Dynamics Group Berhad's Recent Performance Look Like?

Focus Dynamics Group Berhad certainly has been doing a great job lately as it's been growing its revenue at a really rapid pace. Perhaps the market is expecting future revenue performance to taper off, which has kept the P/S from rising. 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.

Do Revenue Forecasts Match The P/S Ratio?

Focus Dynamics Group 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.

If we review the last year of revenue growth, the company posted a terrific increase of 242%. The latest three year period has also seen a 20% overall rise in revenue, aided extensively by its short-term performance. So we can start by confirming that the company has actually done a good job of growing revenue over that time.

This is in contrast to the rest of the industry, which is expected to grow by 3.5% over the next year, materially lower than the company's recent medium-term annualised growth rates.

With this information, we find it interesting that Focus Dynamics Group 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 Key Takeaway

Its shares have lifted substantially and now Focus Dynamics Group Berhad's P/S is back within range of the industry median. We'd say the price-to-sales ratio's power isn't primarily as a valuation instrument but rather to gauge current investor sentiment and future expectations.

We've established that Focus Dynamics Group Berhad currently trades on a lower than expected P/S since its recent three-year growth is higher than the wider industry forecast. 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.

Plus, you should also learn about these 3 warning signs we've spotted with Focus Dynamics Group Berhad (including 2 which can't be ignored).

If you're unsure about the strength of Focus Dynamics Group 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.

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