Sentiment Still Eluding Dagang NeXchange Berhad (KLSE:DNEX)

With a price-to-sales (or "P/S") ratio of 0.9x Dagang NeXchange Berhad (KLSE:DNEX) may be sending very bullish signals at the moment, given that almost half of all the Semiconductor companies in Malaysia have P/S ratios greater than 3x and even P/S higher than 6x are not unusual. However, the P/S might be quite low for a reason and it requires further investigation to determine if it's justified.

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Check out our latest analysis for Dagang NeXchange Berhad

How Dagang NeXchange Berhad Has Been Performing

Dagang NeXchange Berhad hasn't been tracking well recently as its declining revenue compares poorly to other companies, which have seen some growth in their revenues on average. The P/S ratio is probably low because investors think this poor revenue performance isn't going to get any better. If you still like the company, you'd be hoping this isn't the case so that you could potentially pick up some stock while it's out of favour.

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

How Is Dagang NeXchange Berhad's Revenue Growth Trending?

The only time you'd be truly comfortable seeing a P/S as depressed as Dagang NeXchange Berhad's is when the company's growth is on track to lag the industry decidedly.

Taking a look back first, the company's revenue growth last year wasn't something to get excited about as it posted a disappointing decline of 8.1%. As a result, revenue from three years ago have also fallen 23% overall. So unfortunately, we have to acknowledge that the company has not done a great job of growing revenue over that time.

Turning to the outlook, the next year should generate growth of 23% as estimated by the one analyst watching the company. With the industry only predicted to deliver 9.2%, the company is positioned for a stronger revenue result.

With this in consideration, we find it intriguing that Dagang NeXchange Berhad's P/S sits behind most of its industry peers. Apparently some shareholders are doubtful of the forecasts and have been accepting significantly lower selling prices.

What Does Dagang NeXchange Berhad's P/S Mean For Investors?

Generally, our preference is to limit the use of the price-to-sales ratio to establishing what the market thinks about the overall health of a company.

A look at Dagang NeXchange Berhad's revenues reveals that, despite glowing future growth forecasts, its P/S is much lower than we'd expect. There could be some major risk factors that are placing downward pressure on the P/S ratio. At least price risks look to be very low, but investors seem to think future revenues could see a lot of volatility.

A lot of potential risks can sit within a company's balance sheet. Take a look at our free balance sheet analysis for Dagang NeXchange Berhad with six simple checks on some of these key factors.

If companies with solid past earnings growth is up your alley, you may wish to see this free collection of other companies with strong earnings growth and low P/E ratios.

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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.