Investors Aren't Entirely Convinced By LYC Healthcare Berhad's (KLSE:LYC) Revenues

With a price-to-sales (or "P/S") ratio of 0.4x LYC Healthcare Berhad (KLSE:LYC) may be sending bullish signals at the moment, given that almost half of all the IT companies in Malaysia have P/S ratios greater than 1.8x and even P/S higher than 5x are not unusual. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the reduced P/S.

See our latest analysis for LYC Healthcare Berhad

How Has LYC Healthcare Berhad Performed Recently?

With revenue growth that's exceedingly strong of late, LYC Healthcare Berhad has been doing very well. It might be that many expect the strong revenue performance to degrade substantially, which has repressed the P/S ratio. If that doesn't eventuate, then existing shareholders have reason to be quite 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 LYC Healthcare Berhad will help you shine a light on its historical performance.

How Is LYC Healthcare Berhad's Revenue Growth Trending?

In order to justify its P/S ratio, LYC Healthcare Berhad would need to produce sluggish growth that's trailing the industry.

Retrospectively, the last year delivered an exceptional 41% gain to the company's top line. The latest three year period has also seen an excellent 248% overall rise in revenue, aided by its short-term performance. Accordingly, shareholders would have definitely welcomed those medium-term rates of revenue growth.

When compared to the industry's one-year growth forecast of 23%, the most recent medium-term revenue trajectory is noticeably more alluring

With this information, we find it odd that LYC Healthcare Berhad is trading at a P/S lower than the industry. Apparently some shareholders believe the recent performance has exceeded its limits and have been accepting significantly lower selling prices.

The Bottom Line On LYC Healthcare Berhad's P/S

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.

Our examination of LYC Healthcare Berhad revealed its three-year revenue trends aren't boosting its P/S anywhere near as much as we would have predicted, given they look better than current industry expectations. When we see robust revenue growth that outpaces the industry, we presume that there are notable underlying risks to the company's future performance, which is exerting downward pressure on the P/S ratio. At least price risks look to be very low if recent medium-term revenue trends continue, but investors seem to think future revenue could see a lot of volatility.

And what about other risks? Every company has them, and we've spotted 3 warning signs for LYC Healthcare Berhad (of which 2 are concerning!) you should know about.

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.