Stock Analysis

Subdued Growth No Barrier To Orgabio Holdings Berhad (KLSE:ORGABIO) With Shares Advancing 29%

KLSE:ORGABIO
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Despite an already strong run, Orgabio Holdings Berhad (KLSE:ORGABIO) shares have been powering on, with a gain of 29% in the last thirty days. Looking back a bit further, it's encouraging to see the stock is up 48% in the last year.

Even after such a large jump in price, it's still not a stretch to say that Orgabio Holdings Berhad's price-to-sales (or "P/S") ratio of 1.5x right now seems quite "middle-of-the-road" compared to the Food 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 Orgabio Holdings Berhad

ps-multiple-vs-industry
KLSE:ORGABIO Price to Sales Ratio vs Industry June 4th 2024

What Does Orgabio Holdings Berhad's Recent Performance Look Like?

The revenue growth achieved at Orgabio Holdings Berhad over the last year would be more than acceptable for most companies. It might be that many expect the respectable revenue performance to wane, which has kept the P/S from rising. Those who are bullish on Orgabio Holdings Berhad will be hoping that this isn't the case, so that they can pick up the stock at a lower valuation.

Although there are no analyst estimates available for Orgabio Holdings 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 P/S Ratio?

There's an inherent assumption that a company should be matching the industry for P/S ratios like Orgabio Holdings Berhad's to be considered reasonable.

Taking a look back first, we see that the company managed to grow revenues by a handy 7.8% last year. The solid recent performance means it was also able to grow revenue by 13% in total over the last three years. So we can start by confirming that the company has actually done a good job of growing revenue over that time.

Comparing the recent medium-term revenue trends against the industry's one-year growth forecast of 7.9% shows it's noticeably less attractive.

In light of this, it's curious that Orgabio Holdings Berhad's P/S sits in line with the majority of other companies. It seems most investors are ignoring the fairly limited recent growth rates and are willing to pay up for exposure to the stock. They may be setting themselves up for future disappointment if the P/S falls to levels more in line with recent growth rates.

The Key Takeaway

Orgabio Holdings Berhad appears to be back in favour with a solid price jump bringing its P/S back in line with other companies in the industry Generally, our preference is to limit the use of the price-to-sales ratio to establishing what the market thinks about the overall health of a company.

We've established that Orgabio Holdings Berhad's average P/S is a bit surprising since its recent three-year growth is lower than the wider industry forecast. When we see weak revenue with slower than industry growth, we suspect the share price is at risk of declining, bringing the P/S back in line with expectations. Unless the recent medium-term conditions improve, it's hard to accept the current share price as fair value.

You should always think about risks. Case in point, we've spotted 4 warning signs for Orgabio Holdings Berhad you should be aware of, and 2 of them don't sit too well with us.

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.