Hextar Capital Berhad's (KLSE:HEXCAP) 46% Jump Shows Its Popularity With Investors

The Hextar Capital Berhad (KLSE:HEXCAP) share price has done very well over the last month, posting an excellent gain of 46%. Unfortunately, the gains of the last month did little to right the losses of the last year with the stock still down 29% over that time.

In spite of the firm bounce in price, it's still not a stretch to say that Hextar Capital Berhad's price-to-sales (or "P/S") ratio of 1.8x right now seems quite "middle-of-the-road" compared to the Communications industry in Malaysia, where the median P/S ratio is around 2.1x. Although, it's not wise to simply ignore the P/S without explanation as investors may be disregarding a distinct opportunity or a costly mistake.

View our latest analysis for Hextar Capital Berhad

How Has Hextar Capital Berhad Performed Recently?

With revenue growth that's exceedingly strong of late, Hextar Capital Berhad has been doing very well. The P/S is probably moderate because investors think this strong revenue growth might not be enough to outperform the broader industry in the near future. 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 not quite in favour.

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

How Is Hextar Capital Berhad's Revenue Growth Trending?

In order to justify its P/S ratio, Hextar Capital 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 75%. The strong recent performance means it was also able to grow revenue by 210% in total over the last three years. So we can start by confirming that the company has done a great job of growing revenue over that time.

Comparing that to the industry, which is predicted to deliver 44% growth in the next 12 months, the company's momentum is pretty similar based on recent medium-term annualised revenue results.

With this information, we can see why Hextar Capital Berhad is trading at a fairly similar P/S to the industry. It seems most investors are expecting to see average growth rates continue into the future and are only willing to pay a moderate amount for the stock.

The Bottom Line On Hextar Capital Berhad's P/S

Its shares have lifted substantially and now Hextar Capital Berhad's P/S is back within range of the industry median. 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.

It appears to us that Hextar Capital Berhad maintains its moderate P/S off the back of its recent three-year growth being in line with the wider industry forecast. With previous revenue trends that keep up with the current industry outlook, it's hard to justify the company's P/S ratio deviating much from it's current point. Unless the recent medium-term conditions change, they will continue to support the share price at these levels.

And what about other risks? Every company has them, and we've spotted 4 warning signs for Hextar Capital Berhad (of which 1 shouldn't be ignored!) 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.