SaudiGold Group Berhad's (KLSE:SG) Shares Bounce 50% But Its Business Still Trails The Industry

Those holding SaudiGold Group Berhad (KLSE:SG) shares would be relieved that the share price has rebounded 50% in the last thirty days, but it needs to keep going to repair the recent damage it has caused to investor portfolios. Still, the 30-day jump doesn't change the fact that longer term shareholders have seen their stock decimated by the 50% share price drop in the last twelve months.

In spite of the firm bounce in price, considering around half the companies operating in Malaysia's Food industry have price-to-sales ratios (or "P/S") above 1.1x, you may still consider SaudiGold Group Berhad as an solid investment opportunity with its 0.3x P/S ratio. However, the P/S might be low for a reason and it requires further investigation to determine if it's justified.

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View our latest analysis for SaudiGold Group Berhad

What Does SaudiGold Group Berhad's Recent Performance Look Like?

For instance, SaudiGold Group Berhad's receding revenue in recent times would have to be some food for thought. It might be that many expect the disappointing revenue performance to continue or accelerate, which has repressed the P/S. Those who are bullish on SaudiGold Group Berhad will be hoping that this isn't the case so that they can pick up the stock at a lower valuation.

We don't have analyst forecasts, but you can see how recent trends are setting up the company for the future by checking out our free report on SaudiGold Group Berhad's earnings, revenue and cash flow.

Is There Any Revenue Growth Forecasted For SaudiGold Group Berhad?

SaudiGold Group 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.

Taking a look back first, the company's revenue growth last year wasn't something to get excited about as it posted a disappointing decline of 3.8%. As a result, revenue from three years ago have also fallen 5.8% overall. Accordingly, shareholders would have felt downbeat about the medium-term rates of revenue growth.

Weighing that medium-term revenue trajectory against the broader industry's one-year forecast for expansion of 4.7% shows it's an unpleasant look.

In light of this, it's understandable that SaudiGold Group Berhad's P/S would sit below the majority of other companies. However, we think shrinking revenues are unlikely to lead to a stable P/S over the longer term, which could set up shareholders for future disappointment. Even just maintaining these prices could be difficult to achieve as recent revenue trends are already weighing down the shares.

The Bottom Line On SaudiGold Group Berhad's P/S

Despite SaudiGold Group Berhad's share price climbing recently, its P/S still lags most other companies. It's argued the price-to-sales ratio is an inferior measure of value within certain industries, but it can be a powerful business sentiment indicator.

It's no surprise that SaudiGold Group Berhad maintains its low P/S off the back of its sliding revenue over the medium-term. Right now shareholders are accepting the low P/S as they concede future revenue probably won't provide any pleasant surprises either. If recent medium-term revenue trends continue, it's hard to see the share price moving strongly in either direction in the near future under these circumstances.

Before you take the next step, you should know about the 2 warning signs for SaudiGold Group Berhad that we have uncovered.

If you're unsure about the strength of SaudiGold 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.