More Unpleasant Surprises Could Be In Store For INTEKPLUS Co., Ltd.'s (KOSDAQ:064290) Shares After Tumbling 30%

Unfortunately for some shareholders, the INTEKPLUS Co., Ltd. (KOSDAQ:064290) share price has dived 30% in the last thirty days, prolonging recent pain. For any long-term shareholders, the last month ends a year to forget by locking in a 70% share price decline.

In spite of the heavy fall in price, there still wouldn't be many who think INTEKPLUS' price-to-sales (or "P/S") ratio of 1.5x is worth a mention when the median P/S in Korea's Semiconductor industry is similar at about 1.2x. 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.

Check out our latest analysis for INTEKPLUS

What Does INTEKPLUS' P/S Mean For Shareholders?

INTEKPLUS could be doing better as its revenue has been going backwards lately while most other companies have been seeing positive revenue growth. Perhaps the market is expecting its poor revenue performance to improve, keeping the P/S from dropping. However, if this isn't the case, investors might get caught out paying too much for the stock.

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

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

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

Retrospectively, the last year delivered a frustrating 1.5% 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 6.8% in total. So we can start by confirming that the company has generally done a good job of growing revenue over that time, even though it had some hiccups along the way.

Turning to the outlook, the next year should generate growth of 50% as estimated by the two analysts watching the company. With the industry predicted to deliver 62% growth, the company is positioned for a weaker revenue result.

In light of this, it's curious that INTEKPLUS' P/S sits in line with the majority of other companies. It seems most investors are ignoring the fairly limited growth expectations and are willing to pay up for exposure to the stock. Maintaining these prices will be difficult to achieve as this level of revenue growth is likely to weigh down the shares eventually.

What We Can Learn From INTEKPLUS' P/S?

Following INTEKPLUS' share price tumble, its P/S is just clinging on to the industry median P/S. We'd say the price-to-sales ratio's power isn't primarily as a valuation instrument but rather to gauge current investor sentiment and future expectations.

When you consider that INTEKPLUS' revenue growth estimates are fairly muted compared to the broader industry, it's easy to see why we consider it unexpected to be trading at its current P/S ratio. 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. A positive change is needed in order to justify the current price-to-sales ratio.

Plus, you should also learn about these 2 warning signs we've spotted with INTEKPLUS (including 1 which can't be ignored).

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