Revenues Tell The Story For Minetech Resources Berhad (KLSE:MINETEC) As Its Stock Soars 250%

The Minetech Resources Berhad (KLSE:MINETEC) share price has done very well over the last month, posting an excellent gain of 250%. The last month tops off a massive increase of 218% in the last year.

After such a large jump in price, when almost half of the companies in Malaysia's Metals and Mining industry have price-to-sales ratios (or "P/S") below 0.5x, you may consider Minetech Resources Berhad as a stock probably not worth researching with its 2x P/S ratio. However, the P/S might be high for a reason and it requires further investigation to determine if it's justified.

View our latest analysis for Minetech Resources Berhad

How Has Minetech Resources Berhad Performed Recently?

With revenue growth that's exceedingly strong of late, Minetech Resources Berhad has been doing very well. The P/S ratio is probably high because investors think this strong revenue growth will be enough to outperform the broader industry in the near future. If not, then existing shareholders might be a little nervous about the viability of the share price.

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

Is There Enough Revenue Growth Forecasted For Minetech Resources Berhad?

In order to justify its P/S ratio, Minetech Resources Berhad would need to produce impressive growth in excess of the industry.

Taking a look back first, we see that the company grew revenue by an impressive 34% last year. The latest three year period has also seen an excellent 116% overall rise in revenue, aided by its short-term performance. So we can start by confirming that the company has done a great job of growing revenue over that time.

Comparing that to the industry, which is only predicted to deliver 3.5% growth in the next 12 months, the company's momentum is stronger based on recent medium-term annualised revenue results.

With this information, we can see why Minetech Resources Berhad is trading at such a high P/S compared to the industry. Presumably shareholders aren't keen to offload something they believe will continue to outmanoeuvre the wider industry.

The Key Takeaway

Minetech Resources Berhad's P/S is on the rise since its shares have risen strongly. We'd say the price-to-sales ratio's power isn't primarily as a valuation instrument but rather to gauge current investor sentiment and future expectations.

We've established that Minetech Resources Berhad maintains its high P/S on the strength of its recent three-year growth being higher than the wider industry forecast, as expected. At this stage investors feel the potential continued revenue growth in the future is great enough to warrant an inflated P/S. Barring any significant changes to the company's ability to make money, the share price should continue to be propped up.

Having said that, be aware Minetech Resources Berhad is showing 4 warning signs in our investment analysis, and 3 of those shouldn't be ignored.

Of course, profitable companies with a history of great earnings growth are generally safer bets. So you may wish to see this free collection of other companies that have reasonable P/E ratios and have grown earnings strongly.

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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.