Positive Sentiment Still Eludes Focus Dynamics Group Berhad (KLSE:FOCUS) Following 50% Share Price Slump

Focus Dynamics Group Berhad (KLSE:FOCUS) shares have had a horrible month, losing 50% after a relatively good period beforehand. For any long-term shareholders, the last month ends a year to forget by locking in a 50% share price decline.

Following the heavy fall in price, Focus Dynamics Group Berhad may be sending bullish signals at the moment with its price-to-sales (or "P/S") ratio of 0.8x, since 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 are not unusual. 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 Focus Dynamics Group Berhad

How Focus Dynamics Group Berhad Has Been Performing

With revenue growth that's exceedingly strong of late, Focus Dynamics Group Berhad has been doing very well. Perhaps the market is expecting future revenue performance to dwindle, which has kept the P/S suppressed. 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 out of favour.

Although there are no analyst estimates available for Focus Dynamics Group Berhad, take a look at this free data-rich visualisation to see how the company stacks up on earnings, revenue and cash flow.

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

There's an inherent assumption that a company should underperform the industry for P/S ratios like Focus Dynamics Group Berhad's to be considered reasonable.

Taking a look back first, we see that the company grew revenue by an impressive 145% last year. The strong recent performance means it was also able to grow revenue by 49% in total over the last three years. Therefore, it's fair to say the revenue growth recently has been superb for the company.

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 information, we find it odd that Focus Dynamics Group Berhad is trading at a P/S lower than the industry. Apparently some shareholders believe the recent performance has exceeded its limits and have been accepting significantly lower selling prices.

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

Focus Dynamics Group Berhad's recently weak share price has pulled its P/S back below other Hospitality companies. While the price-to-sales ratio shouldn't be the defining factor in whether you buy a stock or not, it's quite a capable barometer of revenue expectations.

Our examination of Focus Dynamics Group 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.

Plus, you should also learn about these 3 warning signs we've spotted with Focus Dynamics Group Berhad (including 2 which 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.