Benign Growth For Tiong Seng Holdings Limited (SGX:BFI) Underpins Its Share Price

When close to half the companies operating in the Construction industry in Singapore have price-to-sales ratios (or "P/S") above 0.8x, you may consider Tiong Seng Holdings Limited (SGX:BFI) as an attractive investment with its 0.1x P/S ratio. However, the P/S might be low for a reason and it requires further investigation to determine if it's justified.

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View our latest analysis for Tiong Seng Holdings

How Has Tiong Seng Holdings Performed Recently?

For instance, Tiong Seng Holdings' receding revenue in recent times would have to be some food for thought. Perhaps the market believes the recent revenue performance isn't good enough to keep up the industry, causing the P/S ratio to suffer. Those who are bullish on Tiong Seng Holdings will be hoping that this isn't the case so that they can pick up the stock at a lower valuation.

Want the full picture on earnings, revenue and cash flow for the company? Then our free report on Tiong Seng Holdings will help you shine a light on its historical performance.

Do Revenue Forecasts Match The Low P/S Ratio?

Tiong Seng Holdings' P/S ratio would be typical for a company that's only expected to deliver limited growth, and importantly, perform worse than the industry.

In reviewing the last year of financials, we were disheartened to see the company's revenues fell to the tune of 28%. However, a few very strong years before that means that it was still able to grow revenue by an impressive 55% in total over the last three years. Although it's been a bumpy ride, it's still fair to say the revenue growth recently has been more than adequate for the company.

Comparing the recent medium-term revenue trends against the industry's one-year growth forecast of 41% shows it's noticeably less attractive.

In light of this, it's understandable that Tiong Seng Holdings' 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 Tiong Seng Holdings' P/S?

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.

As we suspected, our examination of Tiong Seng Holdings revealed its three-year revenue trends are contributing to its low P/S, given they look worse than 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. Unless the recent medium-term conditions improve, they will continue to form a barrier for the share price around these levels.

Plus, you should also learn about these 3 warning signs we've spotted with Tiong Seng Holdings (including 2 which don't sit too well with us).

If strong companies turning a profit tickle your fancy, then you'll want to check out this free list of interesting companies that trade on a low P/E (but have proven they can grow earnings).

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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.