Despite an already strong run, Yoma Strategic Holdings Ltd. (SGX:Z59) shares have been powering on, with a gain of 56% in the last thirty days. Looking back a bit further, it's encouraging to see the stock is up 49% in the last year.

Although its price has surged higher, Yoma Strategic Holdings' price-to-sales (or "P/S") ratio of 1x might still make it look like a buy right now compared to the Real Estate industry in Singapore, where around half of the companies have P/S ratios above 1.7x and even P/S above 4x are quite common. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the reduced P/S.

What Does Yoma Strategic Holdings' P/S Mean For Shareholders?

Recent times have been quite advantageous for Yoma Strategic Holdings as its revenue has been rising very briskly. Perhaps the market is expecting future revenue performance to dwindle, which has kept the P/S suppressed. 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.

Is There Any Revenue Growth Forecasted For Yoma Strategic Holdings?

In order to justify its P/S ratio, Yoma Strategic Holdings would need to produce sluggish growth that's trailing the industry.

If we review the last year of revenue growth, the company posted a terrific increase of 107%. Pleasingly, revenue has also lifted 151% in aggregate from three years ago, thanks to the last 12 months of growth. So we can start by confirming that the company has done a great job of growing revenue over that time.

This is in contrast to the rest of the industry, which is expected to grow by 1.5% over the next year, materially lower than the company's recent medium-term annualised growth rates.

In light of this, it's peculiar that Yoma Strategic Holdings' P/S sits below the majority of other companies. It looks like most investors are not convinced the company can maintain its recent growth rates.

The Final Word

The latest share price surge wasn't enough to lift Yoma Strategic Holdings' P/S close to the industry median. We'd say the price-to-sales ratio's power isn't primarily as a valuation instrument but rather to gauge current investor sentiment and future expectations.

Our examination of Yoma Strategic Holdings revealed its three-year revenue trends aren't boosting its P/S anywhere near as much as we would have predicted, given they look better than current industry expectations. When we see robust revenue growth that outpaces the industry, we presume that there are notable underlying risks to the company's future performance, which is exerting downward pressure on the P/S ratio. At least price risks look to be very low if recent medium-term revenue trends continue, but investors seem to think future revenue could see a lot of volatility.

Before you settle on your opinion, we've discovered 2 warning signs for Yoma Strategic Holdings (1 shouldn't be ignored!) that you should be aware of.

If you're unsure about the strength of Yoma Strategic Holdings' 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.

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