Market Might Still Lack Some Conviction On Avaland Berhad (KLSE:AVALAND) Even After 29% Share Price Boost

Despite an already strong run, Avaland Berhad (KLSE:AVALAND) shares have been powering on, with a gain of 29% in the last thirty days. The last 30 days bring the annual gain to a very sharp 86%.

In spite of the firm bounce in price, Avaland Berhad may still be sending bullish signals at the moment with its price-to-sales (or "P/S") ratio of 0.8x, since almost half of all companies in the Real Estate industry in Malaysia have P/S ratios greater than 1.6x and even P/S higher than 4x are not unusual. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's limited.

See our latest analysis for Avaland Berhad

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

Avaland Berhad certainly has been doing a good job lately as it's been growing revenue more than most other companies. It might be that many expect the strong revenue performance to degrade substantially, which has repressed the share price, and thus the P/S ratio. If not, then existing shareholders have reason to be quite optimistic about the future direction of the share price.

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

Is There Any Revenue Growth Forecasted For Avaland Berhad?

Avaland 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, we see that the company grew revenue by an impressive 170% last year. The latest three year period has also seen an excellent 32% 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.

Shifting to the future, estimates from the lone analyst covering the company suggest revenue should grow by 15% over the next year. That's shaping up to be materially higher than the 11% growth forecast for the broader industry.

In light of this, it's peculiar that Avaland Berhad's P/S sits below the majority of other companies. Apparently some shareholders are doubtful of the forecasts and have been accepting significantly lower selling prices.

The Key Takeaway

Despite Avaland Berhad's share price climbing recently, its P/S still lags most other companies. Typically, we'd caution against reading too much into price-to-sales ratios when settling on investment decisions, though it can reveal plenty about what other market participants think about the company.

Avaland Berhad's analyst forecasts revealed that its superior revenue outlook isn't contributing to its P/S anywhere near as much as we would have predicted. The reason for this depressed P/S could potentially be found in the risks the market is pricing in. At least price risks look to be very low, but investors seem to think future revenues could see a lot of volatility.

Many other vital risk factors can be found on the company's balance sheet. Take a look at our free balance sheet analysis for Avaland Berhad with six simple checks on some of these key factors.

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.