The Market Doesn't Like What It Sees From XOX Technology Berhad's (KLSE:XOXTECH) Revenues Yet

XOX Technology Berhad's (KLSE:XOXTECH) price-to-sales (or "P/S") ratio of 0.4x may look like a very appealing investment opportunity when you consider close to half the companies in the Wireless Telecom industry in Malaysia have P/S ratios greater than 3.2x. However, the P/S might be quite low for a reason and it requires further investigation to determine if it's justified.

Check out our latest analysis for XOX Technology Berhad

What Does XOX Technology Berhad's Recent Performance Look Like?

The revenue growth achieved at XOX Technology Berhad over the last year would be more than acceptable for most companies. Perhaps the market is expecting this acceptable revenue performance to take a dive, which has kept the P/S suppressed. 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 out of favour.

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

How Is XOX Technology Berhad's Revenue Growth Trending?

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

If we review the last year of revenue growth, the company posted a terrific increase of 29%. The strong recent performance means it was also able to grow revenue by 134% 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 13,130% growth in the next 12 months, the company's momentum is weaker, based on recent medium-term annualised revenue results.

In light of this, it's understandable that XOX Technology Berhad's P/S sits below the majority of other companies. Apparently many shareholders weren't comfortable holding on to something they believe will continue to trail the wider industry.

The Bottom Line On XOX Technology Berhad's P/S

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.

Our examination of XOX Technology Berhad confirms that the company's revenue trends over the past three-year years are a key factor in its low price-to-sales ratio, as we suspected, given they fall short of current industry expectations. At this stage investors feel the potential for an improvement in revenue isn't great enough to justify a higher P/S ratio. If recent medium-term revenue trends continue, it's hard to see the share price experience a reversal of fortunes anytime soon.

Don't forget that there may be other risks. For instance, we've identified 2 warning signs for XOX Technology Berhad that you should be aware of.

Of course, profitable companies with a history of great earnings growth are generally safer bets. So you may wish to see this free collection of other companies that have reasonable P/E ratios and have grown earnings strongly.

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

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.