Market Cool On VCI Global Limited’s (NASDAQ:VCIG) Revenues Pushing Shares 54% Lower

Unfortunately for some shareholders, the VCI Global Limited (NASDAQ:VCIG) share price has dived 54% in the last thirty days, prolonging recent pain. The recent drop completes a disastrous twelve months for shareholders, who are sitting on a 100% loss during that time.

After such a large drop in price, when close to half the companies operating in the United States’ Professional Services industry have price-to-sales ratios (or “P/S”) above 1.1x, you may consider VCI Global as an enticing stock to check out with its 0.4x P/S ratio. Although, it’s not wise to just take the P/S at face value as there may be an explanation why it’s limited.

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View our latest analysis for VCI Global

How VCI Global Has Been Performing

The revenue growth achieved at VCI Global over the last year would be more than acceptable for most companies. Perhaps the market is expecting this acceptable revenue performance to take a dive, which has kept the P/S suppressed. If that doesn’t eventuate, then existing shareholders have reason to be optimistic about the future direction of the share price.

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

Do Revenue Forecasts Match The Low P/S Ratio?

There’s an inherent assumption that a company should underperform the industry for P/S ratios like VCI Global’s to be considered reasonable.

If we review the last year of revenue growth, the company posted a terrific increase of 25%. The strong recent performance means it was also able to grow revenue by 180% in total over the last three years. 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 7.3% over the next year, materially lower than the company’s recent medium-term annualised growth rates.

In light of this, it’s peculiar that VCI Global’s P/S sits below the majority of other companies. Apparently some shareholders believe the recent performance has exceeded its limits and have been accepting significantly lower selling prices.

The Final Word

The southerly movements of VCI Global’s shares means its P/S is now sitting at a pretty low level. Using the price-to-sales ratio alone to determine if you should sell your stock isn’t sensible, however it can be a practical guide to the company’s future prospects.

We’re very surprised to see VCI Global currently trading on a much lower than expected P/S since its recent three-year growth is higher than the wider industry forecast. When we see strong revenue with faster-than-industry growth, we assume there are some significant underlying risks to the company’s ability to make money which is applying downwards 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.

Plus, you should also learn about these 4 warning signs we’ve spotted with VCI Global (including 2 which are a bit concerning).

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.