What TT Vision Holdings Berhad's (KLSE:TTVHB) 29% Share Price Gain Is Not Telling You

Those holding TT Vision Holdings Berhad (KLSE:TTVHB) shares would be relieved that the share price has rebounded 29% in the last thirty days, but it needs to keep going to repair the recent damage it has caused to investor portfolios. Unfortunately, the gains of the last month did little to right the losses of the last year with the stock still down 25% over that time.

Following the firm bounce in price, when almost half of the companies in Malaysia's Semiconductor industry have price-to-sales ratios (or "P/S") below 3.2x, you may consider TT Vision Holdings Berhad as a stock not worth researching with its 6.4x 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.

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See our latest analysis for TT Vision Holdings Berhad

What Does TT Vision Holdings Berhad's Recent Performance Look Like?

For instance, TT Vision Holdings 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.

Want the full picture on earnings, revenue and cash flow for the company? Then our free report on TT Vision Holdings Berhad will help you shine a light on its historical performance.

Is There Enough Revenue Growth Forecasted For TT Vision Holdings Berhad?

TT Vision Holdings Berhad's P/S ratio would be typical for a company that's expected to deliver very strong growth, and importantly, perform much better than the industry.

Retrospectively, the last year delivered a frustrating 2.8% decrease to the company's top line. This has soured the latest three-year period, which nevertheless managed to deliver a decent 20% overall rise in revenue. Accordingly, while they would have preferred to keep the run going, shareholders would be roughly satisfied with the medium-term rates of revenue growth.

Comparing that to the industry, which is predicted to deliver 14% growth in the next 12 months, the company's momentum is weaker, based on recent medium-term annualised revenue results.

With this information, we find it concerning that TT Vision Holdings Berhad is trading at a P/S higher than the industry. It seems most investors are ignoring the fairly limited recent growth rates and are hoping for a turnaround in the company's business prospects. Only the boldest would assume these prices are sustainable as a continuation of recent revenue trends is likely to weigh heavily on the share price eventually.

The Final Word

The strong share price surge has lead to TT Vision Holdings Berhad's P/S soaring as well. Using the price-to-sales ratio alone to determine if you should sell your stock isn't sensible, however it can be a practical guide to the company's future prospects.

Our examination of TT Vision Holdings Berhad revealed its poor three-year revenue trends aren't detracting from the P/S as much as we though, given they look worse than current industry expectations. When we see slower than industry revenue growth but an elevated P/S, there's considerable risk of the share price declining, sending the P/S lower. Unless there is a significant improvement in the company's medium-term performance, it will be difficult to prevent the P/S ratio from declining to a more reasonable level.

We don't want to rain on the parade too much, but we did also find 4 warning signs for TT Vision Holdings Berhad (2 shouldn't be ignored!) that you need to be mindful of.

If these risks are making you reconsider your opinion on TT Vision Holdings 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.