Take Care Before Jumping Onto THINKWARE Corporation (KOSDAQ:084730) Even Though It's 30% Cheaper

The THINKWARE Corporation (KOSDAQ:084730) share price has fared very poorly over the last month, falling by a substantial 30%. The recent drop completes a disastrous twelve months for shareholders, who are sitting on a 50% loss during that time.

Even after such a large drop in price, you could still be forgiven for feeling indifferent about THINKWARE's P/S ratio of 0.2x, since the median price-to-sales (or "P/S") ratio for the Consumer Durables industry in Korea is also close to 0.5x. 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 THINKWARE

What Does THINKWARE's P/S Mean For Shareholders?

Revenue has risen firmly for THINKWARE recently, which is pleasing to see. One possibility is that the P/S is moderate because investors think this respectable revenue growth might not be enough to outperform the broader industry in the near future. If that doesn't eventuate, then existing shareholders probably aren't too pessimistic about the future direction of the share price.

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

How Is THINKWARE's Revenue Growth Trending?

There's an inherent assumption that a company should be matching the industry for P/S ratios like THINKWARE's to be considered reasonable.

Retrospectively, the last year delivered an exceptional 27% gain to the company's top line. Pleasingly, revenue has also lifted 130% in aggregate from three years ago, thanks to the last 12 months of growth. So we can start by confirming that the company has done a great job of growing revenue over that time.

This is in contrast to the rest of the industry, which is expected to grow by 7.0% over the next year, materially lower than the company's recent medium-term annualised growth rates.

With this information, we find it interesting that THINKWARE 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 Final Word

With its share price dropping off a cliff, the P/S for THINKWARE looks to be in line with the rest of the Consumer Durables industry. 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.

To our surprise, THINKWARE revealed its three-year revenue trends aren't contributing to its P/S as much as we would have predicted, given they look better than current industry expectations. There could be some unobserved threats to revenue preventing the P/S ratio from matching this positive performance. It appears some are indeed anticipating revenue instability, because the persistence of these recent medium-term conditions would normally provide a boost to the share price.

We don't want to rain on the parade too much, but we did also find 1 warning sign for THINKWARE that you need to be mindful of.

If you're unsure about the strength of THINKWARE'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.