There wouldn't be many who think Marine & General Berhad's (KLSE:M&G) price-to-sales (or "P/S") ratio of 0.4x is worth a mention when the median P/S for the Energy Services industry in Malaysia is similar at about 0.7x. While this might not raise any eyebrows, if the P/S ratio is not justified investors could be missing out on a potential opportunity or ignoring looming disappointment.
View our latest analysis for Marine & General Berhad
What Does Marine & General Berhad's Recent Performance Look Like?
Recent times have been quite advantageous for Marine & General Berhad as its revenue has been rising very briskly. The P/S is probably moderate because investors think this strong revenue growth might not be enough to outperform the broader industry in the near future. Those who are bullish on Marine & General Berhad 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 Marine & General Berhad, take a look at this free data-rich visualisation to see how the company stacks up on earnings, revenue and cash flow.
How Is Marine & General Berhad's Revenue Growth Trending?
The only time you'd be comfortable seeing a P/S like Marine & General Berhad's is when the company's growth is tracking the industry closely.
Taking a look back first, we see that the company grew revenue by an impressive 40% last year. The strong recent performance means it was also able to grow revenue by 44% in total over the last three years. Accordingly, shareholders would have definitely welcomed those medium-term rates of revenue growth.
Weighing the recent medium-term upward revenue trajectory against the broader industry's one-year forecast for contraction of 3.3% shows it's a great look while it lasts.
With this in mind, we find it intriguing that Marine & General Berhad's P/S matches its industry peers. Apparently some shareholders believe the recent performance is at its limits and have been accepting lower selling prices.
The Final Word
It's argued the price-to-sales ratio is an inferior measure of value within certain industries, but it can be a powerful business sentiment indicator.
Our examination of Marine & General Berhad revealed its growing revenue over the medium-term hasn't helped elevate its P/S above that of the industry, which is surprising given the industry is set to shrink. There could be some unobserved threats to revenue preventing the P/S ratio from outpacing the industry much like its revenue performance. Perhaps there is some hesitation about the company's ability to stay its recent course and swim against the current of the broader industry turmoil. It appears some are indeed anticipating revenue instability, because this relative performance should normally provide a boost to the share price.