Despite an already strong run, Koh Brothers Group Limited (SGX:K75) shares have been powering on, with a gain of 30% in the last thirty days. The annual gain comes to 107% following the latest surge, making investors sit up and take notice.

Although its price has surged higher, there still wouldn't be many who think Koh Brothers Group's price-to-sales (or "P/S") ratio of 0.5x is worth a mention when the median P/S in Singapore's Construction industry is similar at about 0.6x. Although, it's not wise to simply ignore the P/S without explanation as investors may be disregarding a distinct opportunity or a costly mistake.

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What Does Koh Brothers Group's P/S Mean For Shareholders?

As an illustration, revenue has deteriorated at Koh Brothers Group over the last year, which is not ideal at all. One possibility is that the P/S is moderate because investors think the company might still do enough to be in line with the broader industry in the near future. If not, then existing shareholders may be a little nervous about the viability of the share price.

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Is There Some Revenue Growth Forecasted For Koh Brothers Group?

In order to justify its P/S ratio, Koh Brothers Group would need to produce growth that's similar to the industry.

Taking a look back first, the company's revenue growth last year wasn't something to get excited about as it posted a disappointing decline of 33%. This means it has also seen a slide in revenue over the longer-term as revenue is down 5.6% in total over the last three years. Accordingly, shareholders would have felt downbeat about the medium-term rates of revenue growth.

Comparing that to the industry, which is predicted to deliver 11% growth in the next 12 months, the company's downward momentum based on recent medium-term revenue results is a sobering picture.

In light of this, it's somewhat alarming that Koh Brothers Group's P/S sits in line with the majority of other companies. It seems most investors are ignoring the recent poor growth rate and are hoping for a turnaround in the company's business prospects. There's a good chance existing shareholders are setting themselves up for future disappointment if the P/S falls to levels more in line with the recent negative growth rates.

What Does Koh Brothers Group's P/S Mean For Investors?

Its shares have lifted substantially and now Koh Brothers Group's P/S is back within range of the industry median. 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 look at Koh Brothers Group revealed its shrinking revenues over the medium-term haven't impacted the P/S as much as we anticipated, given the industry is set to grow. Even though it matches the industry, we're uncomfortable with the current P/S ratio, as this dismal revenue performance is unlikely to support a more positive sentiment for long. Unless the recent medium-term conditions improve markedly, investors will have a hard time accepting the share price as fair value.

Don't forget that there may be other risks. For instance, we've identified 2 warning signs for Koh Brothers Group (1 is significant) you should be aware of.

If these risks are making you reconsider your opinion on Koh Brothers Group, explore our interactive list of high quality stocks to get an idea of what else is out there.

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