PNE PCB Berhad's (KLSE:PNEPCB) price-to-sales (or "P/S") ratio of 0.4x may look like a pretty appealing investment opportunity when you consider close to half the companies in the Electronic industry in Malaysia have P/S ratios greater than 1x. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's limited.

See our latest analysis for PNE PCB Berhad

What Does PNE PCB Berhad's Recent Performance Look Like?

As an illustration, revenue has deteriorated at PNE PCB Berhad over the last year, which is not ideal at all. Perhaps the market believes the recent revenue performance isn't good enough to keep up the industry, causing the P/S ratio to suffer. 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 out of favour.

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 PNE PCB Berhad's earnings, revenue and cash flow.

Do Revenue Forecasts Match The Low P/S Ratio?

In order to justify its P/S ratio, PNE PCB Berhad would need to produce sluggish growth that's trailing the industry.

Retrospectively, the last year delivered a frustrating 4.5% decrease to the company's top line. Regardless, revenue has managed to lift by a handy 25% in aggregate from three years ago, thanks to the earlier period of growth. So we can start by confirming that the company has generally done a good job of growing revenue over that time, even though it had some hiccups along the way.

Comparing the recent medium-term revenue trends against the industry's one-year growth forecast of 16% shows it's noticeably less attractive.

In light of this, it's understandable that PNE PCB Berhad's P/S sits below the majority of other companies. It seems most investors are expecting to see the recent limited growth rates continue into the future and are only willing to pay a reduced amount for the stock.

What We Can Learn From PNE PCB Berhad's P/S?

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 PNE PCB Berhad confirms that the company's revenue trends over the past three-year years are a key factor in its low price-to-sales ratio, as we suspected, given they fall short of current industry expectations. At this stage investors feel the potential for an improvement in revenue isn't great enough to justify a higher P/S ratio. If recent medium-term revenue trends continue, it's hard to see the share price experience a reversal of fortunes anytime soon.

Plus, you should also learn about these 3 warning signs we've spotted with PNE PCB Berhad (including 2 which make us uncomfortable).

If you're unsure about the strength of PNE PCB Berhad's business, why not explore our interactive list of stocks with solid business fundamentals for some other companies you may have missed.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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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