ITM Semiconductor Co., Ltd. (KOSDAQ:084850) Stock Catapults 29% Though Its Price And Business Still Lag The Industry

ITM Semiconductor Co., Ltd. (KOSDAQ:084850) shareholders would be excited to see that the share price has had a great month, posting a 29% gain and recovering from prior weakness. But the gains over the last month weren't enough to make shareholders whole, as the share price is still down 3.4% in the last twelve months.

In spite of the firm bounce in price, when close to half the companies operating in Korea's Semiconductor industry have price-to-sales ratios (or "P/S") above 2x, you may still consider ITM Semiconductor as an enticing stock to check out with its 0.9x 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 ITM Semiconductor

How ITM Semiconductor Has Been Performing

Recent times haven't been great for ITM Semiconductor as its revenue has been falling quicker than most other companies. It seems that many are expecting the dismal revenue performance to persist, which has repressed the P/S. You'd much rather the company improve its revenue performance if you still believe in the business. Or at the very least, you'd be hoping the revenue slide doesn't get any worse if your plan is to 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 ITM Semiconductor will help you uncover what's on the horizon.

Do Revenue Forecasts Match The Low P/S Ratio?

The only time you'd be truly comfortable seeing a P/S as low as ITM Semiconductor's is when the company's growth is on track to lag the industry.

Taking a look back first, the company's revenue growth last year wasn't something to get excited about as it posted a disappointing decline of 8.4%. Even so, admirably revenue has lifted 48% in aggregate from three years ago, notwithstanding the last 12 months. Although it's been a bumpy ride, it's still fair to say the revenue growth recently has been more than adequate for the company.

Looking ahead now, revenue is anticipated to climb by 12% per year during the coming three years according to the three analysts following the company. That's shaping up to be materially lower than the 41% per year growth forecast for the broader industry.

With this in consideration, its clear as to why ITM Semiconductor's P/S is falling short industry peers. Apparently many shareholders weren't comfortable holding on while the company is potentially eyeing a less prosperous future.

What Does ITM Semiconductor's P/S Mean For Investors?

The latest share price surge wasn't enough to lift ITM Semiconductor's P/S close to the industry median. 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.

As expected, our analysis of ITM Semiconductor's analyst forecasts confirms that the company's underwhelming revenue outlook is a major contributor to its low P/S. Right now shareholders are accepting the low P/S as they concede future revenue probably won't provide any pleasant surprises. Unless these conditions improve, they will continue to form a barrier for the share price around these levels.

Before you settle on your opinion, we've discovered 2 warning signs for ITM Semiconductor (1 shouldn't be ignored!) that you should be aware of.

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