With a median price-to-sales (or "P/S") ratio of close to 0.4x in the Metals and Mining industry in Malaysia, you could be forgiven for feeling indifferent about YKGI Holdings Berhad's (KLSE:ASTEEL) P/S ratio of 0.2x. 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.
View our latest analysis for YKGI Holdings Berhad
How Has YKGI Holdings Berhad Performed Recently?
The revenue growth achieved at YKGI Holdings Berhad over the last year would be more than acceptable for most companies. Perhaps the market is expecting future revenue performance to only keep up with the broader industry, which has keeping the P/S in line with expectations. Those who are bullish on YKGI Holdings 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 YKGI Holdings Berhad, 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 YKGI Holdings Berhad?
There's an inherent assumption that a company should be matching the industry for P/S ratios like YKGI Holdings Berhad's to be considered reasonable.
Retrospectively, the last year delivered an exceptional 16% gain to the company's top line. The latest three year period has also seen an excellent 45% overall rise in revenue, aided by its short-term performance. Accordingly, shareholders would have definitely welcomed those medium-term rates of revenue growth.
This is in contrast to the rest of the industry, which is expected to grow by 2.9% over the next year, materially lower than the company's recent medium-term annualised growth rates.
With this information, we find it interesting that YKGI Holdings Berhad is trading at a fairly similar P/S compared to the industry. It may be that most investors are not convinced the company can maintain its recent growth rates.
The Final Word
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.
We've established that YKGI Holdings Berhad currently trades on a lower than expected P/S since its recent three-year growth is higher than the wider industry forecast. It'd be fair to assume that potential risks the company faces could be the contributing factor to the lower than expected P/S. At least the risk of a price drop looks to be subdued if recent medium-term revenue trends continue, but investors seem to think future revenue could see some volatility.