SFA Semicon Co., Ltd.'s (KOSDAQ:036540) Popularity With Investors Under Threat As Stock Sinks 31%

Unfortunately for some shareholders, the SFA Semicon Co., Ltd. (KOSDAQ:036540) share price has dived 31% in the last thirty days, prolonging recent pain. Instead of being rewarded, shareholders who have already held through the last twelve months are now sitting on a 30% share price drop.

Even after such a large drop in price, there still wouldn't be many who think SFA Semicon's price-to-sales (or "P/S") ratio of 1.4x is worth a mention when the median P/S in Korea's Semiconductor industry is similar at about 1.6x. However, investors might be overlooking a clear opportunity or potential setback if there is no rational basis for the P/S.

View our latest analysis for SFA Semicon

How Has SFA Semicon Performed Recently?

SFA Semicon could be doing better as its revenue has been going backwards lately while most other companies have been seeing positive revenue growth. It might be that many expect the dour revenue performance to strengthen positively, which has kept the P/S from falling. If not, then existing shareholders may be a little nervous about the viability of the share price.

Want the full picture on analyst estimates for the company? Then our free report on SFA Semicon will help you uncover what's on the horizon.

Is There Some Revenue Growth Forecasted For SFA Semicon?

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

Retrospectively, the last year delivered a frustrating 31% decrease to the company's top line. This means it has also seen a slide in revenue over the longer-term as revenue is down 22% in total over the last three years. So unfortunately, we have to acknowledge that the company has not done a great job of growing revenue over that time.

Shifting to the future, estimates from the dual analysts covering the company suggest revenue should grow by 35% over the next year. With the industry predicted to deliver 88% growth, the company is positioned for a weaker revenue result.

With this information, we find it interesting that SFA Semicon is trading at a fairly similar P/S compared to the industry. It seems most investors are ignoring the fairly limited growth expectations and are willing to pay up for exposure to the stock. These shareholders may be setting themselves up for future disappointment if the P/S falls to levels more in line with the growth outlook.

What We Can Learn From SFA Semicon's P/S?

With its share price dropping off a cliff, the P/S for SFA Semicon looks to be in line with the rest of the Semiconductor 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.

Our look at the analysts forecasts of SFA Semicon'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. Circumstances like this present a risk to current and prospective investors who may see share prices fall if the low revenue growth impacts the sentiment.

It is also worth noting that we have found 1 warning sign for SFA Semicon that you need to take into consideration.

If you're unsure about the strength of SFA Semicon'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.

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