Stock Analysis

Investors Holding Back On Jardine Matheson Holdings Limited (SGX:J36)

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Jardine Matheson Holdings Limited's (SGX:J36) price-to-sales (or "P/S") ratio of 0.3x may look like a pretty appealing investment opportunity when you consider close to half the companies in the Industrials industry in Singapore have P/S ratios greater than 0.8x. However, the P/S might be low for a reason and it requires further investigation to determine if it's justified.

See our latest analysis for Jardine Matheson Holdings

SGX:J36 Price to Sales Ratio vs Industry January 7th 2024

How Has Jardine Matheson Holdings Performed Recently?

With revenue growth that's inferior to most other companies of late, Jardine Matheson Holdings has been relatively sluggish. It seems that many are expecting the uninspiring revenue performance to persist, which has repressed the growth of the P/S ratio. If you still like the company, you'd be hoping revenue doesn't get any worse and that you could pick up some stock while it's out of favour.

Keen to find out how analysts think Jardine Matheson Holdings' 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?

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

Retrospectively, the last year delivered a decent 3.0% gain to the company's revenues. However, due to its less than impressive performance prior to this period, revenue growth is practically non-existent over the last three years overall. Therefore, it's fair to say that revenue growth has been inconsistent recently for the company.

Looking ahead now, revenue is anticipated to climb by 2.9% during the coming year according to the five analysts following the company. With the industry predicted to deliver 4.2% growth , the company is positioned for a comparable revenue result.

With this information, we find it odd that Jardine Matheson Holdings is trading at a P/S lower than the industry. Apparently some shareholders are doubtful of the forecasts and have been accepting lower selling prices.

The Final Word

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.

We've seen that Jardine Matheson Holdings currently trades on a lower than expected P/S since its forecast growth is in line with the wider industry. When we see middle-of-the-road revenue growth like this, we assume it must be the potential risks that are what is placing 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.

You always need to take note of risks, for example - Jardine Matheson Holdings has 3 warning signs we think you should be aware of.

It's important to make sure you look for a great company, not just the first idea you come across. So if growing profitability aligns with your idea of a great company, take a peek at this free list of interesting companies with strong recent earnings growth (and a low P/E).

Valuation is complex, but we're helping make it simple.

Find out whether Jardine Matheson Holdings is potentially over or undervalued by checking out our comprehensive analysis, which includes fair value estimates, risks and warnings, dividends, insider transactions and financial health.

View the Free Analysis

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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.

About SGX:J36

Jardine Matheson Holdings

Through its subsidiaries, operates in motor vehicles and related operations, property investment and development, food retailing, health and beauty, home furnishings, engineering and construction, and transport businesses in China, Southeast Asia, and internationally.

Excellent balance sheet established dividend payer.