Little Excitement Around Microlink Solutions Berhad's (KLSE:MICROLN) Revenues As Shares Take 40% Pounding

Microlink Solutions Berhad (KLSE:MICROLN) shareholders that were waiting for something to happen have been dealt a blow with a 40% share price drop in the last month. Instead of being rewarded, shareholders who have already held through the last twelve months are now sitting on a 37% share price drop.

Although its price has dipped substantially, Microlink Solutions Berhad's price-to-sales (or "P/S") ratio of 2.1x might still make it look like a buy right now compared to the Software industry in Malaysia, where around half of the companies have P/S ratios above 3.4x and even P/S above 7x are quite common. However, the P/S might be low for a reason and it requires further investigation to determine if it's justified.

View our latest analysis for Microlink Solutions Berhad

How Has Microlink Solutions Berhad Performed Recently?

Microlink Solutions Berhad has been doing a good job lately as it's been growing revenue at a solid pace. One possibility is that the P/S is low because investors think this respectable revenue growth might actually underperform the broader industry in the near future. Those who are bullish on Microlink Solutions Berhad will be hoping that this isn't the case, so that they can pick up the stock at a lower valuation.

Although there are no analyst estimates available for Microlink Solutions Berhad, take a look at this free data-rich visualisation to see how the company stacks up on earnings, revenue and cash flow.

How Is Microlink Solutions Berhad's Revenue Growth Trending?

Microlink Solutions Berhad's P/S ratio would be typical for a company that's only expected to deliver limited growth, and importantly, perform worse than the industry.

Taking a look back first, we see that the company managed to grow revenues by a handy 14% last year. The latest three year period has also seen a 29% overall rise in revenue, aided somewhat by its short-term performance. Therefore, it's fair to say the revenue growth recently has been respectable for the company.

Comparing that to the industry, which is predicted to deliver 27% growth in the next 12 months, the company's momentum is weaker, based on recent medium-term annualised revenue results.

With this in consideration, it's easy to understand why Microlink Solutions Berhad's P/S falls short of the mark set by its industry peers. It seems most investors are expecting to see the recent limited growth rates continue into the future and are only willing to pay a reduced amount for the stock.

What Does Microlink Solutions Berhad's P/S Mean For Investors?

Microlink Solutions Berhad's recently weak share price has pulled its P/S back below other Software companies. It's argued the price-to-sales ratio is an inferior measure of value within certain industries, but it can be a powerful business sentiment indicator.

As we suspected, our examination of Microlink Solutions Berhad revealed its three-year revenue trends are contributing to its low P/S, given they look worse than current industry expectations. At this stage investors feel the potential for an improvement in revenue isn't great enough to justify a higher P/S ratio. If recent medium-term revenue trends continue, it's hard to see the share price experience a reversal of fortunes anytime soon.

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

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.