Revenues Not Telling The Story For Isetan (Singapore) Limited (SGX:I15)

With a median price-to-sales (or "P/S") ratio of close to 0.8x in the Multiline Retail industry in Singapore, you could be forgiven for feeling indifferent about Isetan (Singapore) Limited's (SGX:I15) P/S ratio of 1.2x. 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 Isetan (Singapore)

How Isetan (Singapore) Has Been Performing

We'd have to say that with no tangible growth over the last year, Isetan (Singapore)'s revenue has been unimpressive. One possibility is that the P/S is moderate because investors think this benign revenue growth rate might not be enough to outperform the broader industry in the near future. Those who are bullish on Isetan (Singapore) will be hoping that this isn't the case, so that they can pick up the stock at a lower valuation.

Although there are no analyst estimates available for Isetan (Singapore), take a look at this free data-rich visualisation to see how the company stacks up on earnings, revenue and cash flow.

Is There Some Revenue Growth Forecasted For Isetan (Singapore)?

In order to justify its P/S ratio, Isetan (Singapore) would need to produce growth that's similar to the industry.

Taking a look back first, we see that there was hardly any revenue growth to speak of for the company over the past year. Fortunately, a few good years before that means that it was still able to grow revenue by 12% in total over the last three years. Accordingly, shareholders probably wouldn't have been overly satisfied with the unstable medium-term growth rates.

Comparing that to the industry, which is predicted to deliver 12% growth in the next 12 months, the company's momentum is weaker, based on recent medium-term annualised revenue results.

With this information, we find it interesting that Isetan (Singapore) is trading at a fairly similar P/S compared to the industry. Apparently many investors in the company are less bearish than recent times would indicate and aren't willing to let go of their stock right now. Maintaining these prices will be difficult to achieve as a continuation of recent revenue trends is likely to weigh down the shares eventually.

What Does Isetan (Singapore)'s P/S Mean For Investors?

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.

We've established that Isetan (Singapore)'s average P/S is a bit surprising since its recent three-year growth is lower than the wider industry forecast. When we see weak revenue with slower than industry growth, we suspect the share price is at risk of declining, bringing the P/S back in line with expectations. Unless the recent medium-term conditions improve, it's hard to accept the current share price as fair value.

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

If these risks are making you reconsider your opinion on Isetan (Singapore), explore our interactive list of high quality stocks to get an idea of what else is out there.

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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.