There wouldn't be many who think Koyo International Limited's (Catalist:5OC) price-to-sales (or "P/S") ratio of 0.2x is worth a mention when the median P/S for the Construction industry in Singapore is similar at about 0.4x. 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.
View our latest analysis for Koyo International
How Has Koyo International Performed Recently?
With revenue growth that's exceedingly strong of late, Koyo International has been doing very well. Perhaps the market is expecting future revenue performance to taper off, which has kept the P/S from rising. If that doesn't eventuate, then existing shareholders have reason to be feeling optimistic about the future direction of the share price.
Want the full picture on earnings, revenue and cash flow for the company? Then our free report on Koyo International will help you shine a light on its historical performance.
How Is Koyo International's Revenue Growth Trending?
Koyo International's P/S ratio would be typical for a company that's only expected to deliver moderate growth, and importantly, perform in line with the industry.
If we review the last year of revenue growth, the company posted a terrific increase of 47%. Pleasingly, revenue has also lifted 106% in aggregate from three years ago, thanks to the last 12 months of growth. Therefore, it's fair to say the revenue growth recently has been superb for the company.
Comparing that to the industry, which is only predicted to deliver 21% growth in the next 12 months, the company's momentum is stronger based on recent medium-term annualised revenue results.
With this information, we find it interesting that Koyo International is trading at a fairly similar P/S compared to the industry. Apparently some shareholders believe the recent performance is at its limits and have been accepting lower selling prices.
What We Can Learn From Koyo International'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.
We've established that Koyo International currently trades on a lower than expected P/S since its recent three-year growth is higher than the wider industry forecast. There could be some unobserved threats to revenue preventing the P/S ratio from matching this positive performance. While recent revenue trends over the past medium-term suggest that the risk of a price decline is low, investors appear to see the likelihood of revenue fluctuations in the future.