PNE PCB Berhad (KLSE:PNEPCB) Stock Catapults 33% Though Its Price And Business Still Lag The Industry

PNE PCB Berhad (KLSE:PNEPCB) shareholders are no doubt pleased to see that the share price has bounced 33% in the last month, although it is still struggling to make up recently lost ground. Not all shareholders will be feeling jubilant, since the share price is still down a very disappointing 27% in the last twelve months.

Although its price has surged higher, considering around half the companies operating in Malaysia's Electronic industry have price-to-sales ratios (or "P/S") above 0.9x, you may still consider PNE PCB Berhad as an solid investment opportunity with its 0.4x P/S ratio. However, the P/S might be low for a reason and it requires further investigation to determine if it's justified.

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View our latest analysis for PNE PCB Berhad

How Has PNE PCB Berhad Performed Recently?

The recent revenue growth at PNE PCB Berhad would have to be considered satisfactory if not spectacular. It might be that many expect the respectable revenue performance to degrade, which has repressed the P/S. Those who are bullish on PNE PCB Berhad will be hoping that this isn't the case, so that they can pick up the stock at a lower valuation.

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 PNE PCB Berhad's earnings, revenue and cash flow.

How Is PNE PCB Berhad's Revenue Growth Trending?

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

If we review the last year of revenue growth, the company posted a worthy increase of 4.2%. Still, lamentably revenue has fallen 28% in aggregate from three years ago, which is disappointing. So unfortunately, we have to acknowledge that the company has not done a great job of growing revenue over that time.

In contrast to the company, the rest of the industry is expected to grow by 3.2% over the next year, which really puts the company's recent medium-term revenue decline into perspective.

With this in mind, we understand why PNE PCB Berhad's P/S is lower than most of its industry peers. Nonetheless, there's no guarantee the P/S has reached a floor yet with revenue going in reverse. There's potential for the P/S to fall to even lower levels if the company doesn't improve its top-line growth.

The Final Word

PNE PCB Berhad's stock price has surged recently, but its but its P/S still remains modest. 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.

As we suspected, our examination of PNE PCB Berhad revealed its shrinking revenue over the medium-term is contributing to its low P/S, given the industry is set to grow. Right now shareholders are accepting the low P/S as they concede future revenue probably won't provide any pleasant surprises either. Given the current circumstances, it seems unlikely that the share price will experience any significant movement in either direction in the near future if recent medium-term revenue trends persist.

It is also worth noting that we have found 3 warning signs for PNE PCB Berhad that you need to take into consideration.

If you're unsure about the strength of PNE PCB Berhad's business, why not explore our interactive list of stocks with solid business fundamentals for some other companies you may have missed.

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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.