Take Care Before Diving Into The Deep End On Tune Protect Group Berhad (KLSE:TUNEPRO)

There wouldn't be many who think Tune Protect Group Berhad's (KLSE:TUNEPRO) price-to-sales (or "P/S") ratio of 0.7x is worth a mention when the median P/S for the Insurance industry in Malaysia is similar at about 0.6x. However, investors might be overlooking a clear opportunity or potential setback if there is no rational basis for the P/S.

View our latest analysis for Tune Protect Group Berhad

What Does Tune Protect Group Berhad's P/S Mean For Shareholders?

With revenue growth that's superior to most other companies of late, Tune Protect Group Berhad has been doing relatively well. It might be that many expect the strong revenue performance to wane, which has kept the P/S ratio from rising. If you like the company, you'd be hoping this isn't the case so that you could potentially pick up some stock while it's not quite in favour.

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

Do Revenue Forecasts Match The P/S Ratio?

The only time you'd be comfortable seeing a P/S like Tune Protect Group Berhad's is when the company's growth is tracking the industry closely.

If we review the last year of revenue growth, the company posted a terrific increase of 51%. The latest three year period has also seen an excellent 40% overall rise in revenue, aided by its short-term performance. Accordingly, shareholders would have definitely welcomed those medium-term rates of revenue growth.

Shifting to the future, estimates from the dual analysts covering the company suggest revenue growth will be highly resilient over the next year growing by 16%. That would be an excellent outcome when the industry is expected to decline by 4.3%.

In light of this, it's peculiar that Tune Protect Group Berhad's P/S sits in-line with the majority of other companies. Apparently some shareholders are skeptical of the contrarian forecasts and have been accepting lower selling prices.

The Bottom Line On Tune Protect Group Berhad's P/S

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.

We've established that Tune Protect Group Berhad currently trades on a lower than expected P/S since its growth forecasts are potentially beating a struggling industry. There could be some unobserved threats to revenue preventing the P/S ratio from matching the positive outlook. One such risk is that the company may not live up to analysts' revenue trajectories in tough industry conditions. At least the risk of a price drop looks to be subdued, but investors seem to think future revenue could see some volatility.

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

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.