C*Core Technology Co., Ltd.'s (SHSE:688262) Share Price Is Still Matching Investor Opinion Despite 28% Slump

The C*Core Technology Co., Ltd. (SHSE:688262) share price has softened a substantial 28% over the previous 30 days, handing back much of the gains the stock has made lately. The recent drop has obliterated the annual return, with the share price now down 5.3% over that longer period.

Even after such a large drop in price, C*Core Technology may still be sending very bearish signals at the moment with a price-to-sales (or "P/S") ratio of 16x, since almost half of all companies in the Semiconductor industry in China have P/S ratios under 6.6x and even P/S lower than 3x are not unusual. However, the P/S might be quite high for a reason and it requires further investigation to determine if it's justified.

See our latest analysis for C*Core Technology

What Does C*Core Technology's P/S Mean For Shareholders?

C*Core Technology could be doing better as its revenue has been going backwards lately while most other companies have been seeing positive revenue growth. It might be that many expect the dour revenue performance to recover substantially, which has kept the P/S from collapsing. If not, then existing shareholders may be extremely nervous about the viability of the share price.

Keen to find out how analysts think C*Core Technology's future stacks up against the industry? In that case, our free report is a great place to start.

How Is C*Core Technology's Revenue Growth Trending?

There's an inherent assumption that a company should far outperform the industry for P/S ratios like C*Core Technology's to be considered reasonable.

Retrospectively, the last year delivered a frustrating 11% decrease to the company's top line. This has soured the latest three-year period, which nevertheless managed to deliver a decent 27% overall rise in revenue. Although it's been a bumpy ride, it's still fair to say the revenue growth recently has been mostly respectable for the company.

Looking ahead now, revenue is anticipated to climb by 75% during the coming year according to the only analyst following the company. Meanwhile, the rest of the industry is forecast to only expand by 52%, which is noticeably less attractive.

With this information, we can see why C*Core Technology is trading at such a high P/S compared to the industry. Apparently shareholders aren't keen to offload something that is potentially eyeing a more prosperous future.

What We Can Learn From C*Core Technology's P/S?

C*Core Technology's shares may have suffered, but its P/S remains high. Generally, our preference is to limit the use of the price-to-sales ratio to establishing what the market thinks about the overall health of a company.

We've established that C*Core Technology maintains its high P/S on the strength of its forecasted revenue growth being higher than the the rest of the Semiconductor industry, as expected. At this stage investors feel the potential for a deterioration in revenues is quite remote, justifying the elevated P/S ratio. It's hard to see the share price falling strongly in the near future under these circumstances.

Plus, you should also learn about this 1 warning sign we've spotted with C*Core Technology.

It's important to make sure you look for a great company, not just the first idea you come across. So if growing profitability aligns with your idea of a great company, take a peek at this free list of interesting companies with strong recent earnings growth (and a low P/E).

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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.