Further Upside For Talam Transform Berhad (KLSE:TALAMT) Shares Could Introduce Price Risks After 33% Bounce

Talam Transform Berhad (KLSE:TALAMT) shareholders would be excited to see that the share price has had a great month, posting a 33% gain and recovering from prior weakness. While recent buyers may be laughing, long-term holders might not be as pleased since the recent gain only brings the stock back to where it started a year ago.

Even after such a large jump in price, it's still not a stretch to say that Talam Transform Berhad's price-to-sales (or "P/S") ratio of 1.4x right now seems quite "middle-of-the-road" compared to the Real Estate industry in Malaysia, where the median P/S ratio is around 1.6x. However, investors might be overlooking a clear opportunity or potential setback if there is no rational basis for the P/S.

See our latest analysis for Talam Transform Berhad

What Does Talam Transform Berhad's Recent Performance Look Like?

For example, consider that Talam Transform Berhad's financial performance has been poor lately as its revenue has been in decline. It might be that many expect the company to put the disappointing revenue performance behind them over the coming period, which has kept the P/S from falling. If not, then existing shareholders may be a little nervous about the viability of the share price.

We don't have analyst forecasts, but you can see how recent trends are setting up the company for the future by checking out our free report on Talam Transform Berhad's earnings, revenue and cash flow.

How Is Talam Transform Berhad's Revenue Growth Trending?

There's an inherent assumption that a company should be matching the industry for P/S ratios like Talam Transform Berhad's to be considered reasonable.

In reviewing the last year of financials, we were disheartened to see the company's revenues fell to the tune of 1.0%. Still, the latest three year period has seen an excellent 63% overall rise in revenue, in spite of its unsatisfying short-term performance. Although it's been a bumpy ride, it's still fair to say the revenue growth recently has been more than adequate for the company.

Comparing that to the industry, which is only predicted to deliver 11% growth in the next 12 months, the company's momentum is stronger based on recent medium-term annualised revenue results.

With this information, we find it interesting that Talam Transform Berhad is trading at a fairly similar P/S compared to the industry. Apparently some shareholders believe the recent performance is at its limits and have been accepting lower selling prices.

What We Can Learn From Talam Transform Berhad's P/S?

Its shares have lifted substantially and now Talam Transform Berhad's P/S is back within range of the industry median. 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.

To our surprise, Talam Transform Berhad revealed its three-year revenue trends aren't contributing to its P/S as much as we would have predicted, given they look better than current industry expectations. There could be some unobserved threats to revenue preventing the P/S ratio from matching this positive performance. It appears some are indeed anticipating revenue instability, because the persistence of these recent medium-term conditions would normally provide a boost to the share price.

Don't forget that there may be other risks. For instance, we've identified 3 warning signs for Talam Transform Berhad (2 don't sit too well with us) you should be aware of.

If strong companies turning a profit tickle your fancy, then you'll want to check out this free list of interesting companies that trade on a low P/E (but have proven they can grow earnings).

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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.