IFCA MSC Berhad's (KLSE:IFCAMSC) Popularity With Investors Under Threat As Stock Sinks 25%

To the annoyance of some shareholders, IFCA MSC Berhad (KLSE:IFCAMSC) shares are down a considerable 25% in the last month, which continues a horrid run for the company. Still, a bad month hasn't completely ruined the past year with the stock gaining 44%, which is great even in a bull market.

Even after such a large drop in price, you could still be forgiven for feeling indifferent about IFCA MSC Berhad's P/S ratio of 2.6x, since the median price-to-sales (or "P/S") ratio for the Software industry in Malaysia is also close to 2.1x. While this might not raise any eyebrows, if the P/S ratio is not justified investors could be missing out on a potential opportunity or ignoring looming disappointment.

View our latest analysis for IFCA MSC Berhad

How Has IFCA MSC Berhad Performed Recently?

With revenue growth that's exceedingly strong of late, IFCA MSC Berhad has been doing very well. It might be that many expect the strong revenue performance to wane, which has kept the share price, and thus the P/S ratio, from rising. If that doesn't eventuate, then existing shareholders have reason to be feeling optimistic about the future direction of the share price.

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

Is There Some Revenue Growth Forecasted For IFCA MSC Berhad?

In order to justify its P/S ratio, IFCA MSC Berhad would need to produce growth that's similar to the industry.

If we review the last year of revenue growth, the company posted a terrific increase of 36%. Pleasingly, revenue has also lifted 33% in aggregate from three years ago, thanks to the last 12 months of growth. Therefore, it's fair to say the revenue growth recently has been superb for the company.

Comparing that to the industry, which is predicted to deliver 23% growth in the next 12 months, the company's momentum is weaker, based on recent medium-term annualised revenue results.

With this in mind, we find it intriguing that IFCA MSC Berhad's P/S is comparable to that of its industry peers. Apparently many investors in the company are less bearish than recent times would indicate and aren't willing to let go of their stock right now. They may be setting themselves up for future disappointment if the P/S falls to levels more in line with recent growth rates.

The Bottom Line On IFCA MSC Berhad's P/S

Following IFCA MSC Berhad's share price tumble, its P/S is just clinging on to the industry median P/S. 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 IFCA MSC Berhad revealed its poor three-year revenue trends aren't resulting in a lower P/S as per our expectations, given they look worse than current industry outlook. Right now we are uncomfortable with the P/S as this revenue performance isn't likely to support a more positive sentiment for long. 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.

Plus, you should also learn about these 2 warning signs we've spotted with IFCA MSC Berhad.

It's important to make sure you look for a great company, not just the first idea you come across. So if growing profitability aligns with your idea of a great company, take a peek at this free list of interesting companies with strong recent earnings growth (and a low P/E).

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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.