LB Semicon Inc. (KOSDAQ:061970) Looks Inexpensive After Falling 28% But Perhaps Not Attractive Enough

The LB Semicon Inc. (KOSDAQ:061970) share price has fared very poorly over the last month, falling by a substantial 28%. The drop over the last 30 days has capped off a tough year for shareholders, with the share price down 49% in that time.

Since its price has dipped substantially, given about half the companies operating in Korea's Semiconductor industry have price-to-sales ratios (or "P/S") above 1.2x, you may consider LB Semicon as an attractive investment with its 0.3x P/S ratio. However, the P/S might be low for a reason and it requires further investigation to determine if it's justified.

See our latest analysis for LB Semicon

How Has LB Semicon Performed Recently?

With revenue growth that's inferior to most other companies of late, LB Semicon has been relatively sluggish. Perhaps the market is expecting the current trend of poor revenue growth to continue, which has kept the P/S suppressed. If you still like the company, you'd be hoping revenue doesn't get any worse and that you could pick up some stock while it's out of favour.

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

Is There Any Revenue Growth Forecasted For LB Semicon?

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

If we review the last year of revenue growth, the company posted a worthy increase of 10.0%. Still, lamentably revenue has fallen 5.3% in aggregate from three years ago, which is disappointing. Accordingly, shareholders would have felt downbeat about the medium-term rates of revenue growth.

Looking ahead now, revenue is anticipated to climb by 11% during the coming year according to the only analyst following the company. That's shaping up to be materially lower than the 61% growth forecast for the broader industry.

With this in consideration, its clear as to why LB Semicon's P/S is falling short industry peers. It seems most investors are expecting to see limited future growth and are only willing to pay a reduced amount for the stock.

The Final Word

The southerly movements of LB Semicon's shares means its P/S is now sitting at a pretty low level. It's argued the price-to-sales ratio is an inferior measure of value within certain industries, but it can be a powerful business sentiment indicator.

We've established that LB Semicon maintains its low P/S on the weakness of its forecast growth being lower than the wider industry, as expected. Shareholders' pessimism on the revenue prospects for the company seems to be the main contributor to the depressed P/S. Unless these conditions improve, they will continue to form a barrier for the share price around these levels.

Plus, you should also learn about these 2 warning signs we've spotted with LB Semicon.

If companies with solid past earnings growth is up your alley, you may wish to see this free collection of other companies with strong earnings growth and low P/E ratios.

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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.