DGB Asia Berhad's (KLSE:DGB) Shares Not Telling The Full Story

You may think that with a price-to-sales (or "P/S") ratio of 0.4x DGB Asia Berhad (KLSE:DGB) is a stock worth checking out, seeing as almost half of all the Electronic companies in Malaysia have P/S ratios greater than 0.9x and even P/S higher than 3x aren't out of the ordinary. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the reduced P/S.

Check out our latest analysis for DGB Asia Berhad

What Does DGB Asia Berhad's Recent Performance Look Like?

The recent revenue growth at DGB Asia Berhad would have to be considered satisfactory if not spectacular. Perhaps the market believes the recent revenue performance might fall short of industry figures in the near future, leading to a reduced P/S. If you 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.

Although there are no analyst estimates available for DGB Asia 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 DGB Asia Berhad's Revenue Growth Trending?

There's an inherent assumption that a company should underperform the industry for P/S ratios like DGB Asia Berhad's to be considered reasonable.

Retrospectively, the last year delivered a decent 4.7% gain to the company's revenues. Pleasingly, revenue has also lifted 212% in aggregate from three years ago, partly thanks to the last 12 months of growth. So we can start by confirming that the company has done a great job of growing revenues over that time.

When compared to the industry's one-year growth forecast of 40%, the most recent medium-term revenue trajectory is noticeably more alluring

With this in mind, we find it intriguing that DGB Asia Berhad's P/S isn't as high compared to that of its industry peers. It looks like most investors are not convinced the company can maintain its recent growth rates.

What Does DGB Asia Berhad's P/S Mean For Investors?

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.

We're very surprised to see DGB Asia Berhad currently trading on a much lower than expected P/S since its recent three-year growth is higher than the wider industry forecast. 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. It appears many are indeed anticipating revenue instability, because the persistence of these recent medium-term conditions would normally provide a boost to the share price.

And what about other risks? Every company has them, and we've spotted 4 warning signs for DGB Asia Berhad (of which 2 are a bit concerning!) you should know about.

If strong companies turning a profit tickle your fancy, then you'll want to check out this free list of interesting companies that trade on a low P/E (but have proven they can grow earnings).

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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.