Robosense Technology Co., Ltd (HKG:2498) Shares Slammed 74% But Getting In Cheap Might Be Difficult Regardless

The Robosense Technology Co., Ltd (HKG:2498) share price has fared very poorly over the last month, falling by a substantial 74%. To make matters worse, the recent drop has wiped out a year's worth of gains with the share price now back where it started a year ago.

In spite of the heavy fall in price, when almost half of the companies in Hong Kong's Electronic industry have price-to-sales ratios (or "P/S") below 0.4x, you may still consider Robosense Technology as a stock not worth researching with its 6x 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 so lofty.

Check out our latest analysis for Robosense Technology

What Does Robosense Technology's P/S Mean For Shareholders?

Recent times have been pleasing for Robosense Technology as its revenue has risen in spite of the industry's average revenue going into reverse. Perhaps the market is expecting the company's future revenue growth to buck the trend of the industry, contributing to a higher P/S. However, if this isn't the case, investors might get caught out paying too much for the stock.

Want the full picture on analyst estimates for the company? Then our free report on Robosense Technology will help you uncover what's on the horizon.

Is There Enough Revenue Growth Forecasted For Robosense Technology?

The only time you'd be truly comfortable seeing a P/S as steep as Robosense Technology's is when the company's growth is on track to outshine the industry decidedly.

Taking a look back first, we see that the company grew revenue by an impressive 111% last year. This great performance means it was also able to deliver immense revenue growth over the last three years. Therefore, it's fair to say the revenue growth recently has been superb for the company.

Turning to the outlook, the next three years should generate growth of 70% per annum as estimated by the four analysts watching the company. That's shaping up to be materially higher than the 20% per year growth forecast for the broader industry.

In light of this, it's understandable that Robosense Technology's P/S sits above the majority of other companies. Apparently shareholders aren't keen to offload something that is potentially eyeing a more prosperous future.

The Key Takeaway

A significant share price dive has done very little to deflate Robosense Technology's very lofty P/S. While the price-to-sales ratio shouldn't be the defining factor in whether you buy a stock or not, it's quite a capable barometer of revenue expectations.

We've established that Robosense Technology maintains its high P/S on the strength of its forecasted revenue growth being higher than the the rest of the Electronic industry, as expected. Right now shareholders are comfortable with the P/S as they are quite confident future revenues aren't under threat. Unless the analysts have really missed the mark, these strong revenue forecasts should keep the share price buoyant.

Plus, you should also learn about these 3 warning signs we've spotted with Robosense Technology (including 2 which shouldn't be ignored).

If companies with solid past earnings growth is up your alley, you may wish to see this free collection of other companies with strong earnings growth and low P/E ratios.

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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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com