Some Epoxy Base Electronic Material Corporation Limited (SHSE:603002) Shareholders Look For Exit As Shares Take 27% Pounding

Epoxy Base Electronic Material Corporation Limited (SHSE:603002) shareholders won't be pleased to see that the share price has had a very rough month, dropping 27% and undoing the prior period's positive performance. The drop over the last 30 days has capped off a tough year for shareholders, with the share price down 16% in that time.

Although its price has dipped substantially, it's still not a stretch to say that Epoxy Base Electronic Material's price-to-sales (or "P/S") ratio of 2.2x right now seems quite "middle-of-the-road" compared to the Chemicals industry in China, where the median P/S ratio is around 1.9x. 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.

See our latest analysis for Epoxy Base Electronic Material

What Does Epoxy Base Electronic Material's P/S Mean For Shareholders?

Epoxy Base Electronic Material hasn't been tracking well recently as its declining revenue compares poorly to other companies, which have seen some growth in their revenues on average. Perhaps the market is expecting its poor revenue performance to improve, keeping the P/S from dropping. However, if this isn't the case, investors might get caught out paying too much for the stock.

If you'd like to see what analysts are forecasting going forward, you should check out our free report on Epoxy Base Electronic Material.

Do Revenue Forecasts Match The P/S Ratio?

The only time you'd be comfortable seeing a P/S like Epoxy Base Electronic Material's is when the company's growth is tracking the industry closely.

Retrospectively, the last year delivered a frustrating 34% decrease to the company's top line. The last three years don't look nice either as the company has shrunk revenue by 17% in aggregate. Therefore, it's fair to say the revenue growth recently has been undesirable for the company.

Looking ahead now, revenue is anticipated to climb by 18% during the coming year according to the lone analyst following the company. That's shaping up to be materially lower than the 22% growth forecast for the broader industry.

In light of this, it's curious that Epoxy Base Electronic Material's P/S sits in line with the majority of other companies. It seems most investors are ignoring the fairly limited growth expectations and are willing to pay up for exposure to the stock. These shareholders may be setting themselves up for future disappointment if the P/S falls to levels more in line with the growth outlook.

What Does Epoxy Base Electronic Material's P/S Mean For Investors?

With its share price dropping off a cliff, the P/S for Epoxy Base Electronic Material looks to be in line with the rest of the Chemicals industry. 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.

Our look at the analysts forecasts of Epoxy Base Electronic Material's revenue prospects has shown that its inferior revenue outlook isn't negatively impacting its P/S as much as we would have predicted. At present, we aren't confident in the P/S as the predicted future revenues aren't likely to support a more positive sentiment for long. Circumstances like this present a risk to current and prospective investors who may see share prices fall if the low revenue growth impacts the sentiment.

We don't want to rain on the parade too much, but we did also find 4 warning signs for Epoxy Base Electronic Material (1 doesn't sit too well with us!) that you need to be mindful of.

If you're unsure about the strength of Epoxy Base Electronic Material's 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.