Lacklustre Performance Is Driving ABOV Semiconductor Co., Ltd.'s (KOSDAQ:102120) 33% Price Drop

ABOV Semiconductor Co., Ltd. (KOSDAQ:102120) shares have had a horrible month, losing 33% after a relatively good period beforehand. Looking back over the past twelve months the stock has been a solid performer regardless, with a gain of 21%.

Since its price has dipped substantially, considering around half the companies operating in Korea's Semiconductor industry have price-to-sales ratios (or "P/S") above 1.5x, you may consider ABOV Semiconductor as an solid investment opportunity with its 0.8x P/S ratio. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's limited.

See our latest analysis for ABOV Semiconductor

How Has ABOV Semiconductor Performed Recently?

For instance, ABOV Semiconductor's receding revenue in recent times would have to be some food for thought. It might be that many expect the disappointing revenue performance to continue or accelerate, which has repressed the P/S. However, if this doesn't eventuate then existing shareholders may be feeling optimistic about the future direction of the share price.

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.

Is There Any Revenue Growth Forecasted For ABOV Semiconductor?

In order to justify its P/S ratio, ABOV Semiconductor would need to produce sluggish growth that's trailing the industry.

In reviewing the last year of financials, we were disheartened to see the company's revenues fell to the tune of 6.1%. Even so, admirably revenue has lifted 60% in aggregate from three years ago, notwithstanding the last 12 months. So we can start by confirming that the company has generally done a very good job of growing revenue over that time, even though it had some hiccups along the way.

Comparing the recent medium-term revenue trends against the industry's one-year growth forecast of 87% shows it's noticeably less attractive.

In light of this, it's understandable that ABOV Semiconductor's P/S sits below the majority of other companies. It seems most investors are expecting to see the recent limited growth rates continue into the future and are only willing to pay a reduced amount for the stock.

What We Can Learn From ABOV Semiconductor's P/S?

ABOV Semiconductor's recently weak share price has pulled its P/S back below other Semiconductor companies. 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.

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.

We don't want to rain on the parade too much, but we did also find 3 warning signs for ABOV Semiconductor (1 is a bit concerning!) that you need to be mindful of.

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.