Yahoo Finance Revenues Not Telling The Story For Iskandar Waterfront City Berhad (KLSE:IWCITY) After Shares Rise 94%
Despite an already strong run, Iskandar Waterfront City Berhad (KLSE:IWCITY) shares have been powering on, with a gain of 94% in the last thirty days. The last month tops off a massive increase of 175% in the last year.
Following the firm bounce in price, given around half the companies in Malaysia's Real Estate industry have price-to-sales ratios (or "P/S") below 1.8x, you may consider Iskandar Waterfront City Berhad as a stock to avoid entirely with its 6.3x P/S ratio. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the highly elevated P/S.
See our latest analysis for Iskandar Waterfront City Berhad
How Iskandar Waterfront City Berhad Has Been Performing
Iskandar Waterfront City Berhad certainly has been doing a great job lately as it's been growing its revenue at a really rapid pace. The P/S ratio is probably high because investors think this strong revenue growth will be enough to outperform the broader industry in the near future. However, if this isn't the case, investors might get caught out paying too much for the stock.
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 Iskandar Waterfront City Berhad's earnings, revenue and cash flow.
Is There Enough Revenue Growth Forecasted For Iskandar Waterfront City Berhad?
In order to justify its P/S ratio, Iskandar Waterfront City Berhad would need to produce outstanding growth that's well in excess of the industry.
If we review the last year of revenue growth, we see the company's revenues grew exponentially. Despite this strong recent growth, it's still struggling to catch up as its three-year revenue frustratingly shrank by 36% overall. Accordingly, shareholders would have felt downbeat about the medium-term rates of revenue growth.
Weighing that medium-term revenue trajectory against the broader industry's one-year forecast for expansion of 5.0% shows it's an unpleasant look.
In light of this, it's alarming that Iskandar Waterfront City Berhad's P/S sits above the majority of other companies. Apparently many investors in the company are way more bullish than recent times would indicate and aren't willing to let go of their stock at any price. There's a very good chance existing shareholders are setting themselves up for future disappointment if the P/S falls to levels more in line with the recent negative growth rates.
What Does Iskandar Waterfront City Berhad's P/S Mean For Investors?
Shares in Iskandar Waterfront City Berhad have seen a strong upwards swing lately, which has really helped boost its P/S figure. 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.
Our examination of Iskandar Waterfront City Berhad revealed its shrinking revenue over the medium-term isn't resulting in a P/S as low as we expected, given the industry is set to grow. With a revenue decline on investors' minds, the likelihood of a souring sentiment is quite high which could send the P/S back in line with what we'd expect. Unless the recent medium-term conditions improve markedly, investors will have a hard time accepting the share price as fair value.
It's always necessary to consider the ever-present spectre of investment risk. We've identified 2 warning signs with Iskandar Waterfront City Berhad (at least 1 which is concerning), and understanding them should be part of your investment process.
Of course, profitable companies with a history of great earnings growth are generally safer bets. So you may wish to see this free collection of other companies that have reasonable P/E ratios and have grown earnings strongly.
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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.
