Low Keng Huat (Singapore) Limited (SGX:F1E) Soars 27% But It's A Story Of Risk Vs Reward

Despite an already strong run, Low Keng Huat (Singapore) Limited (SGX:F1E) shares have been powering on, with a gain of 27% in the last thirty days. Looking back a bit further, it's encouraging to see the stock is up 36% in the last year.

Although its price has surged higher, Low Keng Huat (Singapore) may still be sending buy signals at present with its price-to-sales (or "P/S") ratio of 0.6x, considering almost half of all companies in the Real Estate industry in Singapore have P/S ratios greater than 2.4x and even P/S higher than 5x aren't out of the ordinary. 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 Low Keng Huat (Singapore)

What Does Low Keng Huat (Singapore)'s Recent Performance Look Like?

Recent times have been quite advantageous for Low Keng Huat (Singapore) as its revenue has been rising very briskly. One possibility is that the P/S ratio is low because investors think this strong revenue growth might actually underperform the broader industry in the near future. 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 Low Keng Huat (Singapore) will help you shine a light on its historical performance.

Is There Any Revenue Growth Forecasted For Low Keng Huat (Singapore)?

Low Keng Huat (Singapore)'s P/S ratio would be typical for a company that's only expected to deliver limited growth, and importantly, perform worse than the industry.

Retrospectively, the last year delivered an exceptional 31% gain to the company's top line. The strong recent performance means it was also able to grow revenue by 199% in total over the last three years. Accordingly, shareholders would have definitely welcomed those medium-term rates of revenue growth.

Comparing that to the industry, which is predicted to shrink 8.8% in the next 12 months, the company's positive momentum based on recent medium-term revenue results is a bright spot for the moment.

With this information, we find it very odd that Low Keng Huat (Singapore) is trading at a P/S lower than the industry. It looks like most investors are not convinced at all that the company can maintain its recent positive growth rate in the face of a shrinking broader industry.

The Bottom Line On Low Keng Huat (Singapore)'s P/S

Despite Low Keng Huat (Singapore)'s share price climbing recently, its P/S still lags most other companies. We'd say the price-to-sales ratio's power isn't primarily as a valuation instrument but rather to gauge current investor sentiment and future expectations.

Looking at the figures, it's surprising to see Low Keng Huat (Singapore) currently trades on a much lower than expected P/S since its recent three-year revenue growth is beating forecasts for a struggling industry. One assumption would be that there are some underlying risks to revenue that are keeping the P/S from rising to match the its strong performance. Amidst challenging industry conditions, perhaps a key concern is whether the company can sustain its superior revenue growth trajectory. While the chance of the share price dropping sharply is fairly remote, investors do seem to be anticipating future revenue instability.

Plus, you should also learn about these 4 warning signs we've spotted with Low Keng Huat (Singapore) (including 2 which shouldn't be ignored).

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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.