Magna Prima Berhad's (KLSE:MAGNA) Earnings Haven't Escaped The Attention Of Investors

When you see that almost half of the companies in the Real Estate industry in Malaysia have price-to-sales ratios (or "P/S") below 1.7x, Magna Prima Berhad (KLSE:MAGNA) looks to be giving off strong sell signals with its 4.9x P/S ratio. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's so lofty.

View our latest analysis for Magna Prima Berhad

How Magna Prima Berhad Has Been Performing

For instance, Magna Prima Berhad's receding revenue in recent times would have to be some food for thought. One possibility is that the P/S is high because investors think the company will still do enough to outperform the broader industry in the near future. If not, then existing shareholders may be quite nervous about the viability of the share price.

Although there are no analyst estimates available for Magna Prima Berhad, take a look at this free data-rich visualisation to see how the company stacks up on earnings, revenue and cash flow.

How Is Magna Prima Berhad's Revenue Growth Trending?

The only time you'd be truly comfortable seeing a P/S as steep as Magna Prima Berhad's is when the company's growth is on track to outshine the industry decidedly.

In reviewing the last year of financials, we were disheartened to see the company's revenues fell to the tune of 46%. Even so, admirably revenue has lifted 126% in aggregate from three years ago, notwithstanding the last 12 months. So we can start by confirming that the company has generally done a very good job of growing revenue over that time, even though it had some hiccups along the way.

When compared to the industry's one-year growth forecast of 10%, the most recent medium-term revenue trajectory is noticeably more alluring

In light of this, it's understandable that Magna Prima Berhad's P/S sits above the majority of other companies. Presumably shareholders aren't keen to offload something they believe will continue to outmanoeuvre the wider industry.

The Final Word

While the price-to-sales ratio shouldn't be the defining factor in whether you buy a stock or not, it's quite a capable barometer of revenue expectations.

It's no surprise that Magna Prima Berhad can support its high P/S given the strong revenue growth its experienced over the last three-year is superior to the current industry outlook. 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.

It is also worth noting that we have found 1 warning sign for Magna Prima Berhad that you need to take into consideration.

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

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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.