Axiata Group Berhad's (KLSE:AXIATA) Revenues Are Not Doing Enough For Some Investors

Axiata Group Berhad's (KLSE:AXIATA) price-to-sales (or "P/S") ratio of 1x may look like a pretty appealing investment opportunity when you consider close to half the companies in the Wireless Telecom industry in Malaysia have P/S ratios greater than 2.7x. 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 Axiata Group Berhad

What Does Axiata Group Berhad's Recent Performance Look Like?

Recent times haven't been great for Axiata Group Berhad as its revenue has been rising slower than most other companies. Perhaps the market is expecting the current trend of poor revenue growth to continue, which has kept the P/S suppressed. If this is the case, then existing shareholders will probably struggle to get excited about the future direction of the share price.

Keen to find out how analysts think Axiata Group Berhad's future stacks up against the industry? In that case, our free report is a great place to start.

What Are Revenue Growth Metrics Telling Us About The Low P/S?

In order to justify its P/S ratio, Axiata Group Berhad would need to produce sluggish growth that's trailing the industry.

Taking a look back first, we see that the company grew revenue by an impressive 47% last year. However, this wasn't enough as the latest three year period has seen the company endure a nasty 3.8% drop in revenue in aggregate. Accordingly, shareholders would have felt downbeat about the medium-term rates of revenue growth.

Looking ahead now, revenue is anticipated to climb by 1.9% per year during the coming three years according to the analysts following the company. That's shaping up to be materially lower than the 5.8% per year growth forecast for the broader industry.

With this in consideration, its clear as to why Axiata Group Berhad's P/S is falling short industry peers. Apparently many shareholders weren't comfortable holding on while the company is potentially eyeing a less prosperous future.

The Key Takeaway

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.

We've established that Axiata Group Berhad maintains its low P/S on the weakness of its forecast growth being lower than the wider industry, as expected. Right now shareholders are accepting the low P/S as they concede future revenue probably won't provide any pleasant surprises. It's hard to see the share price rising strongly in the near future under these circumstances.

You always need to take note of risks, for example - Axiata Group Berhad has 2 warning signs we think you should be aware of.

If these risks are making you reconsider your opinion on Axiata Group Berhad, explore our interactive list of high quality stocks to get an idea of what else is out there.

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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.