Harvest Miracle Capital Berhad (KLSE:HM) Not Doing Enough For Some Investors As Its Shares Slump 48%

The Harvest Miracle Capital Berhad (KLSE:HM) share price has fared very poorly over the last month, falling by a substantial 48%. The recent drop completes a disastrous twelve months for shareholders, who are sitting on a 64% loss during that time.

Following the heavy fall in price, given about half the companies operating in Malaysia's Electronic industry have price-to-sales ratios (or "P/S") above 1x, you may consider Harvest Miracle Capital Berhad as an attractive investment with its 0.5x P/S ratio. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's limited.

See our latest analysis for Harvest Miracle Capital Berhad

How Has Harvest Miracle Capital Berhad Performed Recently?

It looks like revenue growth has deserted Harvest Miracle Capital Berhad recently, which is not something to boast about. Perhaps the market believes the recent lacklustre revenue performance is a sign of future underperformance relative to industry peers, hurting the P/S. If not, then existing shareholders may be feeling optimistic about the future direction of the share price.

We don't have analyst forecasts, but you can see how recent trends are setting up the company for the future by checking out our free report on Harvest Miracle Capital Berhad's earnings, revenue and cash flow.

Is There Any Revenue Growth Forecasted For Harvest Miracle Capital Berhad?

Harvest Miracle Capital 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.

Retrospectively, the last year delivered virtually the same number to the company's top line as the year before. This isn't what shareholders were looking for as it means they've been left with a 44% decline in revenue over the last three years in total. So unfortunately, we have to acknowledge that the company has not done a great job of growing revenue over that time.

Comparing that to the industry, which is predicted to deliver 43% growth in the next 12 months, the company's downward momentum based on recent medium-term revenue results is a sobering picture.

With this in mind, we understand why Harvest Miracle Capital Berhad's P/S is lower than most of its industry peers. However, we think shrinking revenues are unlikely to lead to a stable P/S over the longer term, which could set up shareholders for future disappointment. Even just maintaining these prices could be difficult to achieve as recent revenue trends are already weighing down the shares.

The Final Word

Harvest Miracle Capital Berhad's recently weak share price has pulled its P/S back below other Electronic companies. We'd say the price-to-sales ratio's power isn't primarily as a valuation instrument but rather to gauge current investor sentiment and future expectations.

It's no surprise that Harvest Miracle Capital Berhad maintains its low P/S off the back of its sliding revenue over the medium-term. At this stage investors feel the potential for an improvement in revenue isn't great enough to justify a higher P/S ratio. Unless the recent medium-term conditions improve, they will continue to form a barrier for the share price around these levels.

We don't want to rain on the parade too much, but we did also find 3 warning signs for Harvest Miracle Capital Berhad (1 can't be ignored!) that you need to be mindful of.

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.