The Market Doesn't Like What It Sees From Axiata Group Berhad's (KLSE:AXIATA) Revenues Yet

Axiata Group Berhad's (KLSE:AXIATA) price-to-sales (or "P/S") ratio of 1.1x 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 2.4x. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the reduced P/S.

View our latest analysis for Axiata Group Berhad

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

With revenue growth that's inferior to most other companies of late, Axiata Group Berhad has been relatively sluggish. The P/S ratio is probably low because investors think this lacklustre revenue performance isn't going to get any better. 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.

Is There Any Revenue Growth Forecasted For Axiata Group Berhad?

The only time you'd be truly comfortable seeing a P/S as low as Axiata Group Berhad's is when the company's growth is on track to lag the industry.

Retrospectively, the last year delivered a decent 13% gain to the company's revenues. Still, lamentably revenue has fallen 6.5% 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.

Shifting to the future, estimates from the analysts covering the company suggest revenue should grow by 3.3% each year over the next three years. With the industry predicted to deliver 6.2% growth per year, the company is positioned for a weaker revenue result.

In light of this, it's understandable that Axiata Group Berhad's P/S sits below the majority of other companies. Apparently many shareholders weren't comfortable holding on while the company is potentially eyeing a less prosperous future.

What Does Axiata Group Berhad's P/S Mean For Investors?

Generally, our preference is to limit the use of the price-to-sales ratio to establishing what the market thinks about the overall health of a company.

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. The company will need a change of fortune to justify the P/S rising higher in the future.

And what about other risks? Every company has them, and we've spotted 2 warning signs for Axiata Group Berhad you should know about.

If you're unsure about the strength of Axiata Group 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com