Positive Sentiment Still Eludes Parlo Berhad (KLSE:PARLO) Following 27% Share Price Slump

Unfortunately for some shareholders, the Parlo Berhad (KLSE:PARLO) share price has dived 27% in the last thirty days, prolonging recent pain. The recent drop completes a disastrous twelve months for shareholders, who are sitting on a 61% loss during that time.

After such a large drop in price, Parlo Berhad's price-to-sales (or "P/S") ratio of 0.4x might make it look like a buy right now compared to the Hospitality industry in Malaysia, where around half of the companies have P/S ratios above 1.5x and even P/S above 4x are quite common. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the reduced P/S.

See our latest analysis for Parlo Berhad

How Has Parlo Berhad Performed Recently?

We'd have to say that with no tangible growth over the last year, Parlo Berhad's revenue has been unimpressive. It might be that many expect the uninspiring revenue performance to worsen, which has repressed the P/S. If not, then existing shareholders may be feeling optimistic about the future direction of the share price.

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

Do Revenue Forecasts Match The Low P/S Ratio?

Parlo Berhad's P/S ratio would be typical for a company that's only expected to deliver limited growth, and importantly, perform worse than the industry.

Retrospectively, the last year delivered virtually the same number to the company's top line as the year before. Spectacularly, three year revenue growth has ballooned by several orders of magnitude, even though the last 12 months were nothing to write home about. Accordingly, shareholders will be pleased, but also have some serious questions to ponder about the last 12 months.

This is in contrast to the rest of the industry, which is expected to grow by 3.4% over the next year, materially lower than the company's recent medium-term annualised growth rates.

In light of this, it's peculiar that Parlo Berhad's P/S sits below the majority of other companies. Apparently some shareholders believe the recent performance has exceeded its limits and have been accepting significantly lower selling prices.

The Final Word

Parlo Berhad's P/S has taken a dip along with its share price. 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.

We're very surprised to see Parlo Berhad currently trading on a much lower than expected P/S since its recent three-year growth is higher than the wider industry forecast. 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. While recent revenue trends over the past medium-term suggest that the risk of a price decline is low, investors appear to perceive a likelihood of revenue fluctuations in the future.

Before you settle on your opinion, we've discovered 2 warning signs for Parlo Berhad that you should be aware of.

It's important to make sure you look for a great company, not just the first idea you come across. So if growing profitability aligns with your idea of a great company, take a peek at this free list of interesting companies with strong recent earnings growth (and a low P/E).

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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.