Alphanox Co.,Ltd. (KOSDAQ:043100) Not Doing Enough For Some Investors As Its Shares Slump 30%

Explore AlphanoxLtd's Fair Values from the Community and select yours

Alphanox Co.,Ltd. (KOSDAQ:043100) shares have retraced a considerable 30% in the last month, reversing a fair amount of their solid recent performance. Instead of being rewarded, shareholders who have already held through the last twelve months are now sitting on a 17% share price drop.

Following the heavy fall in price, AlphanoxLtd may be sending buy signals at present with its price-to-sales (or "P/S") ratio of 1.9x, considering almost half of all companies in the Medical Equipment industry in Korea have P/S ratios greater than 2.7x and even P/S higher than 8x aren't out of the ordinary. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the reduced P/S.

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See our latest analysis for AlphanoxLtd

What Does AlphanoxLtd's Recent Performance Look Like?

As an illustration, revenue has deteriorated at AlphanoxLtd over the last year, which is not ideal at all. Perhaps the market believes the recent revenue performance isn't good enough to keep up the industry, causing the P/S ratio to suffer. Those who are bullish on AlphanoxLtd will be hoping that this isn't the case so that they can pick up the stock at a lower valuation.

Want the full picture on earnings, revenue and cash flow for the company? Then our free report on AlphanoxLtd will help you shine a light on its historical performance.

What Are Revenue Growth Metrics Telling Us About The Low P/S?

In order to justify its P/S ratio, AlphanoxLtd would need to produce sluggish growth that's trailing the industry.

Retrospectively, the last year delivered a frustrating 4.1% decrease to the company's top line. That put a dampener on the good run it was having over the longer-term as its three-year revenue growth is still a noteworthy 12% in total. Accordingly, while they would have preferred to keep the run going, shareholders would be roughly satisfied with the medium-term rates of revenue growth.

This is in contrast to the rest of the industry, which is expected to grow by 36% over the next year, materially higher than the company's recent medium-term annualised growth rates.

With this in consideration, it's easy to understand why AlphanoxLtd's P/S falls short of the mark set by its industry peers. Apparently many shareholders weren't comfortable holding on to something they believe will continue to trail the wider industry.

The Key Takeaway

The southerly movements of AlphanoxLtd's shares means its P/S is now sitting at a pretty low level. 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.

In line with expectations, AlphanoxLtd maintains its low P/S on the weakness of its recent three-year growth being lower than the wider industry forecast. At this stage investors feel the potential for an improvement in revenue isn't great enough to justify a higher P/S ratio. If recent medium-term revenue trends continue, it's hard to see the share price experience a reversal of fortunes anytime soon.

It is also worth noting that we have found 4 warning signs for AlphanoxLtd (3 are a bit unpleasant!) that you need to take into consideration.

Of course, profitable companies with a history of great earnings growth are generally safer bets. So you may wish to see this free collection of other companies that have reasonable P/E ratios and have grown earnings strongly.

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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.