Yahoo Finance TSR Capital Berhad's (KLSE:TSRCAP) Price Is Out Of Tune With Revenues
There wouldn't be many who think TSR Capital Berhad's (KLSE:TSRCAP) price-to-sales (or "P/S") ratio of 0.6x is worth a mention when the median P/S for the Construction industry in Malaysia is similar at about 0.9x. However, investors might be overlooking a clear opportunity or potential setback if there is no rational basis for the P/S.
Check out our latest analysis for TSR Capital Berhad
What Does TSR Capital Berhad's Recent Performance Look Like?
With revenue growth that's exceedingly strong of late, TSR Capital Berhad has been doing very well. 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. 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 not quite in favour.
Want the full picture on earnings, revenue and cash flow for the company? Then our free report on TSR Capital Berhad will help you shine a light on its historical performance.
Do Revenue Forecasts Match The P/S Ratio?
The only time you'd be comfortable seeing a P/S like TSR Capital Berhad's is when the company's growth is tracking the industry closely.
If we review the last year of revenue growth, the company posted a terrific increase of 37%. Still, revenue has fallen 67% in total from three years ago, which is quite disappointing. Accordingly, shareholders would have felt downbeat about the medium-term rates of revenue growth.
In contrast to the company, the rest of the industry is expected to grow by 27% over the next year, which really puts the company's recent medium-term revenue decline into perspective.
With this in mind, we find it worrying that TSR Capital Berhad's P/S exceeds that of its industry peers. Apparently many investors in the company are way less bearish than recent times would indicate and aren't willing to let go of their stock right now. There's a 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 TSR Capital Berhad's P/S Mean For Investors?
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.
The fact that TSR Capital Berhad currently trades at a P/S on par with the rest of the industry is surprising to us since its recent revenues have been in decline over the medium-term, all while the industry is set to grow. Even though it matches the industry, we're uncomfortable with the current P/S ratio, as this dismal revenue performance is unlikely to support a more positive sentiment for long. Unless the recent medium-term conditions improve markedly, investors will have a hard time accepting the share price as fair value.
There are also other vital risk factors to consider and we've discovered 3 warning signs for TSR Capital Berhad (2 don't sit too well with us!) that you should be aware of before investing here.
If companies with solid past earnings growth is up your alley, you may wish to see this free collection of other companies with strong earnings growth and low P/E ratios.
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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.
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