Revenues Working Against Malakoff Corporation Berhad's (KLSE:MALAKOF) Share Price

With a price-to-sales (or "P/S") ratio of 0.6x Malakoff Corporation Berhad (KLSE:MALAKOF) may be sending bullish signals at the moment, given that almost half of all the Renewable Energy companies in Malaysia have P/S ratios greater than 2.5x and even P/S higher than 6x are not unusual. 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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Check out our latest analysis for Malakoff Corporation Berhad

What Does Malakoff Corporation Berhad's Recent Performance Look Like?

Malakoff Corporation Berhad hasn't been tracking well recently as its declining revenue compares poorly to other companies, which have seen some growth in their revenues on average. It seems that many are expecting the poor revenue performance to persist, which has repressed the P/S ratio. 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 Malakoff Corporation 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?

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

Retrospectively, the last year delivered a frustrating 6.4% decrease to the company's top line. Regardless, revenue has managed to lift by a handy 9.1% in aggregate from three years ago, thanks to the earlier period of growth. So we can start by confirming that the company has generally done a good job of growing revenue over that time, even though it had some hiccups along the way.

Turning to the outlook, the next year should bring diminished returns, with revenue decreasing 0.6% as estimated by the eleven analysts watching the company. That's not great when the rest of the industry is expected to grow by 11%.

With this in consideration, we find it intriguing that Malakoff Corporation Berhad's P/S is closely matching its industry peers. However, shrinking revenues are unlikely to lead to a stable P/S over the longer term. Even just maintaining these prices could be difficult to achieve as the weak outlook is weighing down the shares.

What We Can Learn From Malakoff Corporation 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.

With revenue forecasts that are inferior to the rest of the industry, it's no surprise that Malakoff Corporation Berhad's P/S is on the lower end of the spectrum. As other companies in the industry are forecasting revenue growth, Malakoff Corporation Berhad's poor outlook justifies its low P/S ratio. Unless these conditions improve, they will continue to form a barrier for the share price around these levels.

There are also other vital risk factors to consider and we've discovered 2 warning signs for Malakoff Corporation Berhad (1 shouldn't be ignored!) that you should be aware of before investing here.

If you're unsure about the strength of Malakoff Corporation 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.