OCR Group Berhad's (KLSE:OCR) Shares Not Telling The Full Story

OCR Group Berhad's (KLSE:OCR) price-to-sales (or "P/S") ratio of 0.4x might make it look like a buy right now compared to the Real Estate industry in Malaysia, where around half of the companies have P/S ratios above 1.7x and even P/S above 4x are quite common. However, the P/S might be low for a reason and it requires further investigation to determine if it's justified.

View our latest analysis for OCR Group Berhad

How OCR Group Berhad Has Been Performing

OCR Group Berhad certainly has been doing a great job lately as it's been growing its revenue at a really rapid pace. Perhaps the market is expecting future revenue performance to dwindle, which has kept the P/S suppressed. Those who are bullish on OCR Group Berhad will be hoping that this isn't the case, so that they can pick up the stock at a lower valuation.

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

Is There Any Revenue Growth Forecasted For OCR Group Berhad?

OCR Group 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's revenues underwent some rampant growth over the last 12 months. Pleasingly, revenue has also lifted 149% in aggregate from three years ago, thanks to the last 12 months of explosive growth. So we can start by confirming that the company has done a great job of growing revenue over that time.

Comparing that recent medium-term revenue trajectory with the industry's one-year growth forecast of 3.8% shows it's noticeably more attractive.

With this in mind, we find it intriguing that OCR Group Berhad's P/S isn't as high compared to that of its industry peers. It looks like most investors are not convinced the company can maintain its recent growth rates.

What Does OCR Group Berhad's P/S Mean For Investors?

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.

We're very surprised to see OCR Group Berhad currently trading on a much lower than expected P/S since its recent three-year growth is higher than the wider industry forecast. When we see strong revenue with faster-than-industry growth, we assume there are some significant underlying risks to the company's ability to make money which is applying downwards pressure on the P/S ratio. While recent revenue trends over the past medium-term suggest that the risk of a price decline is low, investors appear to perceive a likelihood of revenue fluctuations in the future.

Plus, you should also learn about these 5 warning signs we've spotted with OCR Group Berhad (including 2 which are a bit unpleasant).

If you're unsure about the strength of OCR Group Berhad's business, why not explore our interactive list of stocks with solid business fundamentals for some other companies you may have missed.

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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.