Positive Sentiment Still Eludes Automobile & PCB Inc. (KRX:015260) Following 25% Share Price Slump

Automobile & PCB Inc. (KRX:015260) shares have had a horrible month, losing 25% after a relatively good period beforehand. For any long-term shareholders, the last month ends a year to forget by locking in a 60% share price decline.

Although its price has dipped substantially, you could still be forgiven for feeling indifferent about Automobile & PCB's P/S ratio of 0.2x, since the median price-to-sales (or "P/S") ratio for the Auto Components industry in Korea is about the same. 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.

View our latest analysis for Automobile & PCB

How Automobile & PCB Has Been Performing

For instance, Automobile & PCB's receding revenue in recent times would have to be some food for thought. Perhaps investors believe the recent revenue performance is enough to keep in line with the industry, which is keeping the P/S from dropping off. If you like the company, you'd at least be hoping this is the case so that you could potentially pick up some stock while it's not quite in favour.

Although there are no analyst estimates available for Automobile & PCB, take a look at this free data-rich visualisation to see how the company stacks up on earnings, revenue and cash flow.

Is There Some Revenue Growth Forecasted For Automobile & PCB?

In order to justify its P/S ratio, Automobile & PCB would need to produce growth that's similar to the industry.

In reviewing the last year of financials, we were disheartened to see the company's revenues fell to the tune of 24%. However, a few very strong years before that means that it was still able to grow revenue by an impressive 64% in total over the last three years. Accordingly, while they would have preferred to keep the run going, shareholders would definitely welcome the medium-term rates of revenue growth.

This is in contrast to the rest of the industry, which is expected to grow by 5.1% over the next year, materially lower than the company's recent medium-term annualised growth rates.

With this information, we find it interesting that Automobile & PCB is trading at a fairly similar P/S compared to the industry. It may be that most investors are not convinced the company can maintain its recent growth rates.

The Key Takeaway

Automobile & PCB's plummeting stock price has brought its P/S back to a similar region as the rest of the industry. Typically, we'd caution against reading too much into price-to-sales ratios when settling on investment decisions, though it can reveal plenty about what other market participants think about the company.

We didn't quite envision Automobile & PCB's P/S sitting in line with the wider industry, considering the revenue growth over the last three-year is higher than the current industry outlook. It'd be fair to assume that potential risks the company faces could be the contributing factor to the lower than expected P/S. At least the risk of a price drop looks to be subdued if recent medium-term revenue trends continue, but investors seem to think future revenue could see some volatility.

You should always think about risks. Case in point, we've spotted 3 warning signs for Automobile & PCB you should be aware of, and 2 of them are potentially serious.

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

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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.