Market Might Still Lack Some Conviction On AirAsia X Berhad (KLSE:AAX) Even After 33% Share Price Boost

AirAsia X Berhad (KLSE:AAX) shareholders would be excited to see that the share price has had a great month, posting a 33% gain and recovering from prior weakness. Unfortunately, the gains of the last month did little to right the losses of the last year with the stock still down 27% over that time.

Even after such a large jump in price, you could still be forgiven for feeling indifferent about AirAsia X Berhad's P/S ratio of 0.3x, since the median price-to-sales (or "P/S") ratio for the Airlines industry in Malaysia is also close to 0.7x. Although, it's not wise to simply ignore the P/S without explanation as investors may be disregarding a distinct opportunity or a costly mistake.

Check out our latest analysis for AirAsia X Berhad

What Does AirAsia X Berhad's P/S Mean For Shareholders?

With revenue growth that's superior to most other companies of late, AirAsia X Berhad has been doing relatively well. Perhaps the market is expecting this level of performance to taper off, keeping the P/S from soaring. 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 not quite in favour.

Want the full picture on analyst estimates for the company? Then our free report on AirAsia X Berhad will help you uncover what's on the horizon.

Is There Some Revenue Growth Forecasted For AirAsia X Berhad?

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

Retrospectively, the last year delivered an exceptional 119% gain to the company's top line. This great performance means it was also able to deliver immense revenue growth over the last three years. Therefore, it's fair to say the revenue growth recently has been superb for the company.

Shifting to the future, estimates from the two analysts covering the company suggest revenue should grow by 157% over the next year. With the industry only predicted to deliver 11%, the company is positioned for a stronger revenue result.

With this information, we find it interesting that AirAsia X Berhad is trading at a fairly similar P/S compared to the industry. It may be that most investors aren't convinced the company can achieve future growth expectations.

The Final Word

Its shares have lifted substantially and now AirAsia X Berhad's P/S is back within range of the industry median. While the price-to-sales ratio shouldn't be the defining factor in whether you buy a stock or not, it's quite a capable barometer of revenue expectations.

We've established that AirAsia X Berhad currently trades on a lower than expected P/S since its forecasted revenue growth is higher than the wider industry. When we see a strong revenue outlook, with growth outpacing the industry, we can only assume potential uncertainty around these figures are what might be placing slight pressure on the P/S ratio. At least the risk of a price drop looks to be subdued, but investors seem to think future revenue could see some volatility.

We don't want to rain on the parade too much, but we did also find 1 warning sign for AirAsia X Berhad that you need to be mindful of.

If you're unsure about the strength of AirAsia X 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.