ABOV Semiconductor Co., Ltd. (KOSDAQ:102120) Not Doing Enough For Some Investors As Its Shares Slump 28%

ABOV Semiconductor Co., Ltd. (KOSDAQ:102120) shares have retraced a considerable 28% in the last month, reversing a fair amount of their solid recent performance. Instead of being rewarded, shareholders who have already held through the last twelve months are now sitting on a 46% share price drop.

In spite of the heavy fall in price, it would still be understandable if you think ABOV Semiconductor is a stock with good investment prospects with a price-to-sales ratios (or "P/S") of 0.6x, considering almost half the companies in Korea's Semiconductor industry have P/S ratios above 1.2x. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the reduced P/S.

AI is about to change healthcare. These 20 stocks are working on everything from early diagnostics to drug discovery. The best part - they are all under $10bn in marketcap - there is still time to get in early.

View our latest analysis for ABOV Semiconductor

What Does ABOV Semiconductor's Recent Performance Look Like?

For example, consider that ABOV Semiconductor's financial performance has been pretty ordinary lately as revenue growth is non-existent. One possibility is that the P/S is low because investors think this benign revenue growth rate will likely 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.

Want the full picture on earnings, revenue and cash flow for the company? Then our free report on ABOV Semiconductor will help you shine a light on its historical performance.

How Is ABOV Semiconductor's Revenue Growth Trending?

ABOV Semiconductor's P/S ratio would be typical for a company that's only expected to deliver limited growth, and importantly, perform worse than the industry.

Taking a look back first, we see that there was hardly any revenue growth to speak of for the company over the past year. Still, the latest three year period has seen an excellent 39% overall rise in revenue, in spite of its uninspiring short-term performance. Accordingly, shareholders will be pleased, but also have some questions to ponder about the last 12 months.

Comparing the recent medium-term revenue trends against the industry's one-year growth forecast of 30% shows it's noticeably less attractive.

With this information, we can see why ABOV Semiconductor is trading at a P/S lower than the industry. Apparently many shareholders weren't comfortable holding on to something they believe will continue to trail the wider industry.

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

The southerly movements of ABOV Semiconductor's shares means its P/S is now sitting at a pretty low level. 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.

As we suspected, our examination of ABOV Semiconductor revealed its three-year revenue trends are contributing to its low P/S, given they look worse than current industry expectations. 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.

You need to take note of risks, for example - ABOV Semiconductor has 4 warning signs (and 2 which can't be ignored) we think you should know about.

If these risks are making you reconsider your opinion on ABOV Semiconductor, explore our interactive list of high quality stocks to get an idea of what else is out there.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.