Stock Analysis

Market Still Lacking Some Conviction On Supermax Corporation Berhad (KLSE:SUPERMX)

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There wouldn't be many who think Supermax Corporation Berhad's (KLSE:SUPERMX) price-to-sales (or "P/S") ratio of 3.4x is worth a mention when the median P/S for the Medical Equipment industry in Malaysia is similar at about 3.5x. 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.

See our latest analysis for Supermax Corporation Berhad

KLSE:SUPERMX Price to Sales Ratio vs Industry May 22nd 2024

What Does Supermax Corporation Berhad's P/S Mean For Shareholders?

The recently shrinking revenue for Supermax Corporation Berhad has been in line with the industry. Perhaps the market is expecting future revenue performance to continue matching the industry, which has kept the P/S in line with expectations. If you still like the company, you'd want its revenue trajectory to turn around before making any decisions. In saying that, existing shareholders probably aren't too pessimistic about the share price if the company's revenue continues tracking the industry.

Keen to find out how analysts think Supermax Corporation Berhad's future stacks up against the industry? In that case, our free report is a great place to start.

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

In order to justify its P/S ratio, Supermax Corporation Berhad would need to produce growth that's similar to the industry.

In reviewing the last year of financials, we were disheartened to see the company's revenues fell to the tune of 36%. As a result, revenue from three years ago have also fallen 85% overall. Therefore, it's fair to say the revenue growth recently has been undesirable for the company.

Shifting to the future, estimates from the six analysts covering the company suggest revenue should grow by 61% over the next year. That's shaping up to be materially higher than the 21% growth forecast for the broader industry.

In light of this, it's curious that Supermax Corporation Berhad's P/S sits in line with the majority of other companies. Apparently some shareholders are skeptical of the forecasts and have been accepting lower selling prices.

What Does Supermax Corporation Berhad's P/S Mean For Investors?

Using the price-to-sales ratio alone to determine if you should sell your stock isn't sensible, however it can be a practical guide to the company's future prospects.

Despite enticing revenue growth figures that outpace the industry, Supermax Corporation Berhad's P/S isn't quite what we'd expect. When we see a strong revenue outlook, with growth outpacing the industry, we can only assume potential uncertainty around these figures are what might be placing slight pressure on the P/S ratio. It appears some are indeed anticipating revenue instability, because these conditions should normally provide a boost to the share price.

And what about other risks? Every company has them, and we've spotted 1 warning sign for Supermax Corporation Berhad you should know about.

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).

Valuation is complex, but we're helping make it simple.

Find out whether Supermax Corporation Berhad is potentially over or undervalued by checking out our comprehensive analysis, which includes fair value estimates, risks and warnings, dividends, insider transactions and financial health.

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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.