W-Scope Chungju Plant Co., Ltd. (KOSDAQ:393890) Shares May Have Slumped 26% But Getting In Cheap Is Still Unlikely

To the annoyance of some shareholders, W-Scope Chungju Plant Co., Ltd. (KOSDAQ:393890) shares are down a considerable 26% in the last month, which continues a horrid run for the company. The recent drop completes a disastrous twelve months for shareholders, who are sitting on a 81% loss during that time.

Even after such a large drop in price, you could still be forgiven for feeling indifferent about W-Scope Chungju Plant's P/S ratio of 0.8x, since the median price-to-sales (or "P/S") ratio for the Electrical industry in Korea is also close to 1x. While this might not raise any eyebrows, if the P/S ratio is not justified investors could be missing out on a potential opportunity or ignoring looming disappointment.

Check out our latest analysis for W-Scope Chungju Plant

How Has W-Scope Chungju Plant Performed Recently?

Recent times have been pleasing for W-Scope Chungju Plant as its revenue has risen in spite of the industry's average revenue going into reverse. One possibility is that the P/S ratio is moderate because investors think the company's revenue will be less resilient moving forward. Those who are bullish on W-Scope Chungju Plant will be hoping that this isn't the case, so that they can pick up the stock at a slightly lower valuation.

Want the full picture on analyst estimates for the company? Then our free report on W-Scope Chungju Plant will help you uncover what's on the horizon.

Is There Some Revenue Growth Forecasted For W-Scope Chungju Plant?

In order to justify its P/S ratio, W-Scope Chungju Plant would need to produce growth that's similar to the industry.

Retrospectively, the last year delivered a decent 5.6% gain to the company's revenues. The latest three year period has also seen an excellent 74% overall rise in revenue, aided somewhat by its short-term performance. So we can start by confirming that the company has done a great job of growing revenues over that time.

Turning to the outlook, the next three years should generate growth of 17% each year as estimated by the five analysts watching the company. Meanwhile, the rest of the industry is forecast to expand by 20% per year, which is noticeably more attractive.

With this information, we find it interesting that W-Scope Chungju Plant is trading at a fairly similar P/S compared to the industry. Apparently many investors in the company are less bearish than analysts indicate and aren't willing to let go of their stock right now. Maintaining these prices will be difficult to achieve as this level of revenue growth is likely to weigh down the shares eventually.

What Does W-Scope Chungju Plant's P/S Mean For Investors?

Following W-Scope Chungju Plant's share price tumble, its P/S is just clinging on to the industry median 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.

Our look at the analysts forecasts of W-Scope Chungju Plant'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. This places shareholders' investments at risk and potential investors in danger of paying an unnecessary premium.

Plus, you should also learn about this 1 warning sign we've spotted with W-Scope Chungju Plant.

If these risks are making you reconsider your opinion on W-Scope Chungju Plant, 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.