Yahoo Finance Pinning Down Bright Packaging Industry Berhad's (KLSE:BRIGHT) P/S Is Difficult Right Now
It's not a stretch to say that Bright Packaging Industry Berhad's (KLSE:BRIGHT) price-to-sales (or "P/S") ratio of 0.7x right now seems quite "middle-of-the-road" for companies in the Packaging industry in Malaysia, where the median P/S ratio is around 0.8x. However, investors might be overlooking a clear opportunity or potential setback if there is no rational basis for the P/S.
View our latest analysis for Bright Packaging Industry Berhad
What Does Bright Packaging Industry Berhad's P/S Mean For Shareholders?
With revenue growth that's exceedingly strong of late, Bright Packaging Industry Berhad has been doing very well. Perhaps the market is expecting future revenue performance to taper off, which has kept the P/S from rising. Those who are bullish on Bright Packaging Industry 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 Bright Packaging Industry Berhad, take a look at this free data-rich visualisation to see how the company stacks up on earnings, revenue and cash flow.
Do Revenue Forecasts Match The P/S Ratio?
The only time you'd be comfortable seeing a P/S like Bright Packaging Industry 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 33% last year. The latest three year period has also seen a 22% overall rise in revenue, aided extensively by its short-term performance. Accordingly, shareholders would have probably been satisfied with the medium-term rates of revenue growth.
This is in contrast to the rest of the industry, which is expected to grow by 17% over the next year, materially higher than the company's recent medium-term annualised growth rates.
With this in mind, we find it intriguing that Bright Packaging Industry Berhad's P/S is comparable to that of its industry peers. It seems most investors are ignoring the fairly limited recent growth rates and are willing to pay up for exposure to the stock. They may be setting themselves up for future disappointment if the P/S falls to levels more in line with recent growth rates.
The Bottom Line On Bright Packaging Industry Berhad's P/S
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 Bright Packaging Industry Berhad revealed its poor three-year revenue trends aren't resulting in a lower P/S as per our expectations, given they look worse than current industry outlook. Right now we are uncomfortable with the P/S as this revenue performance isn't likely to support a more positive sentiment for long. Unless the recent medium-term conditions improve, it's hard to accept the current share price as fair value.
Don't forget that there may be other risks. For instance, we've identified 2 warning signs for Bright Packaging Industry Berhad (1 is a bit unpleasant) you should be aware of.
If you're unsure about the strength of Bright Packaging Industry Berhad's business, why not explore our interactive list of stocks with solid business fundamentals for some other companies you may have missed.
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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.
