Stock Analysis

BSL Corporation Berhad's (KLSE:BSLCORP) Business Is Trailing The Industry But Its Shares Aren't

KLSE:BSLCORP
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With a median price-to-sales (or "P/S") ratio of close to 0.5x in the Metals and Mining industry in Malaysia, you could be forgiven for feeling indifferent about BSL Corporation Berhad's (KLSE:BSLCORP) P/S ratio, which comes in at about the same. While this might not raise any eyebrows, if the P/S ratio is not justified investors could be missing out on a potential opportunity or ignoring looming disappointment.

See our latest analysis for BSL Corporation Berhad

ps-multiple-vs-industry
KLSE:BSLCORP Price to Sales Ratio vs Industry October 10th 2024

How Has BSL Corporation Berhad Performed Recently?

For example, consider that BSL Corporation Berhad's financial performance has been poor lately as its revenue has been in decline. Perhaps investors believe the recent revenue performance is enough to keep in line with the industry, which is keeping the P/S from dropping off. If you like the company, you'd at least be hoping this is the case so that you could potentially pick up some stock while it's not quite in favour.

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

Is There Some Revenue Growth Forecasted For BSL Corporation Berhad?

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

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 26%. The last three years don't look nice either as the company has shrunk revenue by 42% in aggregate. Accordingly, shareholders would have felt downbeat about the medium-term rates of revenue growth.

In contrast to the company, the rest of the industry is expected to grow by 6.4% over the next year, which really puts the company's recent medium-term revenue decline into perspective.

With this in mind, we find it worrying that BSL Corporation Berhad's P/S exceeds that of its industry peers. Apparently many investors in the company are way less bearish than recent times would indicate and aren't willing to let go of their stock right now. Only the boldest would assume these prices are sustainable as a continuation of recent revenue trends is likely to weigh on the share price eventually.

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

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.

Our look at BSL Corporation Berhad revealed its shrinking revenues over the medium-term haven't impacted the P/S as much as we anticipated, given the industry is set to grow. Even though it matches the industry, we're uncomfortable with the current P/S ratio, as this dismal revenue performance is unlikely to support a more positive sentiment for long. If recent medium-term revenue trends continue, it will place shareholders' investments at risk and potential investors in danger of paying an unnecessary premium.

Before you take the next step, you should know about the 3 warning signs for BSL Corporation Berhad (2 shouldn't be ignored!) that we have uncovered.

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

Valuation is complex, but we're here to simplify it.

Discover if BSL Corporation Berhad might be undervalued or overvalued with our detailed analysis, featuring fair value estimates, potential risks, dividends, insider trades, and its financial condition.

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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.