Not Many Are Piling Into Alam Maritim Resources Berhad (KLSE:ALAM) Stock Yet As It Plummets 29%

Alam Maritim Resources Berhad (KLSE:ALAM) shareholders won't be pleased to see that the share price has had a very rough month, dropping 29% and undoing the prior period's positive performance. The drop over the last 30 days has capped off a tough year for shareholders, with the share price down 29% in that time.

Since its price has dipped substantially, given about half the companies operating in Malaysia's Energy Services industry have price-to-sales ratios (or "P/S") above 0.7x, you may consider Alam Maritim Resources Berhad as an attractive investment with its 0.2x P/S ratio. However, the P/S might be low for a reason and it requires further investigation to determine if it's justified.

Check out our latest analysis for Alam Maritim Resources Berhad

How Has Alam Maritim Resources Berhad Performed Recently?

Revenue has risen firmly for Alam Maritim Resources Berhad recently, which is pleasing to see. It might be that many expect the respectable revenue performance to degrade substantially, which has repressed the P/S. Those who are bullish on Alam Maritim Resources Berhad will be hoping that this isn't the case, so that they can pick up the stock at a lower valuation.

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

What Are Revenue Growth Metrics Telling Us About The Low P/S?

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

Retrospectively, the last year delivered a decent 9.3% gain to the company's revenues. However, this wasn't enough as the latest three year period has seen an unpleasant 12% overall drop in revenue. So unfortunately, we have to acknowledge that the company has not done a great job of growing revenue over that time.

For that matter, there's little to separate that medium-term revenue trajectory on an annualised basis against the broader industry's one-year forecast for a contraction of 5.9% either.

With this information, it's perhaps strange but not a major surprise that Alam Maritim Resources Berhad is trading at a lower P/S in comparison. In general, shrinking revenues are unlikely to lead to a stable P/S long-term, which could set up shareholders for future disappointment regardless. There is still potential for the P/S to fall to even lower levels if the company doesn't improve its top-line growth, which would be difficult to do with the current industry outlook.

What We Can Learn From Alam Maritim Resources Berhad's P/S?

The southerly movements of Alam Maritim Resources Berhad's shares means its P/S is now sitting at a pretty low level. 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.

Our examination of Alam Maritim Resources Berhad revealed its three-year contraction in revenue is impacting its P/S more than we would have predicted, given the industry is set to shrink at a similar rate. When we see a revenue growth decline that is on par with its peers, we can only assume potential risks are what might be causing the P/S ratio to be lower than average. Perhaps there is some hesitation about the company's ability to stay its recent medium-term course and resist further pain to its business from the broader industry turmoil. It appears some are indeed anticipating revenue instability, because this relative performance should normally provide more support to the share price.

You should always think about risks. Case in point, we've spotted 5 warning signs for Alam Maritim Resources Berhad you should be aware of.

If these risks are making you reconsider your opinion on Alam Maritim Resources Berhad, explore our interactive list of high quality stocks to get an idea of what else is out there.

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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.