Naturalendo Tech Co., Ltd.'s (KOSDAQ:168330) 32% Dip In Price Shows Sentiment Is Matching Revenues

Naturalendo Tech Co., Ltd. (KOSDAQ:168330) shares have retraced a considerable 32% in the last month, reversing a fair amount of their solid recent performance. Still, a bad month hasn't completely ruined the past year with the stock gaining 61%, which is great even in a bull market.

Following the heavy fall in price, Naturalendo Tech may be sending very bullish signals at the moment with its price-to-sales (or "P/S") ratio of 4.6x, since almost half of all companies in the Biotechs industry in Korea have P/S ratios greater than 14.5x and even P/S higher than 61x are not unusual. However, the P/S might be quite low for a reason and it requires further investigation to determine if it's justified.

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See our latest analysis for Naturalendo Tech

What Does Naturalendo Tech's Recent Performance Look Like?

The revenue growth achieved at Naturalendo Tech over the last year would be more than acceptable for most companies. One possibility is that the P/S is low because investors think this respectable revenue growth might actually underperform the broader industry in the near future. If you like the company, you'd be hoping this isn't the case so that you could potentially pick up some stock while it's out of favour.

We don't have analyst forecasts, but you can see how recent trends are setting up the company for the future by checking out our free report on Naturalendo Tech's earnings, revenue and cash flow.

How Is Naturalendo Tech's Revenue Growth Trending?

Naturalendo Tech's P/S ratio would be typical for a company that's expected to deliver very poor growth or even falling revenue, and importantly, perform much worse than the industry.

Retrospectively, the last year delivered a decent 15% gain to the company's revenues. Pleasingly, revenue has also lifted 90% in aggregate from three years ago, partly thanks to the last 12 months of growth. Accordingly, shareholders would have definitely welcomed those medium-term rates of revenue growth.

Comparing the recent medium-term revenue trends against the industry's one-year growth forecast of 56% shows it's noticeably less attractive.

In light of this, it's understandable that Naturalendo Tech's P/S sits below the majority of other companies. It seems most investors are expecting to see the recent limited growth rates continue into the future and are only willing to pay a reduced amount for the stock.

The Final Word

Naturalendo Tech's P/S looks about as weak as its stock price lately. Using the price-to-sales ratio alone to determine if you should sell your stock isn't sensible, however it can be a practical guide to the company's future prospects.

In line with expectations, Naturalendo Tech 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. Unless the recent medium-term conditions improve, they will continue to form a barrier for the share price around these levels.

There are also other vital risk factors to consider and we've discovered 3 warning signs for Naturalendo Tech (2 make us uncomfortable!) that you should be aware of before investing here.

If these risks are making you reconsider your opinion on Naturalendo Tech, 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.