Beng Kuang Marine Limited (SGX:BEZ) shares have had a really impressive month, gaining 61% after a shaky period beforehand. But the gains over the last month weren't enough to make shareholders whole, as the share price is still down 7.6% in the last twelve months.
Although its price has surged higher, Beng Kuang Marine's price-to-sales (or "P/S") ratio of 0.2x might still make it look like a buy right now compared to the Commercial Services industry in Singapore, where around half of the companies have P/S ratios above 0.8x and even P/S above 3x are quite common. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's limited.
View our latest analysis for Beng Kuang Marine
What Does Beng Kuang Marine's Recent Performance Look Like?
Revenue has risen firmly for Beng Kuang Marine recently, which is pleasing to see. It might be that many expect the respectable revenue performance to degrade substantially, which has repressed the P/S. 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.
We don't have analyst forecasts, but you can see how recent trends are setting up the company for the future by checking out our free report on Beng Kuang Marine's earnings, revenue and cash flow.
How Is Beng Kuang Marine's Revenue Growth Trending?
There's an inherent assumption that a company should underperform the industry for P/S ratios like Beng Kuang Marine's to be considered reasonable.
Retrospectively, the last year delivered an exceptional 15% gain to the company's top line. Still, revenue has barely risen at all from three years ago in total, which is not ideal. Accordingly, shareholders probably wouldn't have been overly satisfied with the unstable medium-term growth rates.
Comparing the recent medium-term revenue trends against the industry's one-year growth forecast of 14% shows it's noticeably less attractive.
In light of this, it's understandable that Beng Kuang Marine's P/S sits below the majority of other companies. Apparently many shareholders weren't comfortable holding on to something they believe will continue to trail the wider industry.
The Key Takeaway
Beng Kuang Marine's stock price has surged recently, but its but its P/S still remains modest. 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.
As we suspected, our examination of Beng Kuang Marine revealed its three-year revenue trends are contributing to its low P/S, given they look worse than current industry expectations. Right now shareholders are accepting the low P/S as they concede future revenue probably won't provide any pleasant surprises. If recent medium-term revenue trends continue, it's hard to see the share price experience a reversal of fortunes anytime soon.