Protec Mems Technology Inc.'s (KOSDAQ:147760) Business Is Trailing The Industry But Its Shares Aren't

It's not a stretch to say that Protec Mems Technology Inc.'s (KOSDAQ:147760) price-to-sales (or "P/S") ratio of 1.1x seems quite "middle-of-the-road" for Semiconductor companies in Korea, seeing as it matches the P/S ratio of the wider industry. 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.

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View our latest analysis for Protec Mems Technology

What Does Protec Mems Technology's P/S Mean For Shareholders?

As an illustration, revenue has deteriorated at Protec Mems Technology over the last year, which is not ideal at all. It might be that many expect the company to put the disappointing revenue performance behind them over the coming period, which has kept the P/S from falling. If not, then existing shareholders may be a little nervous about the viability of the share price.

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

Is There Some Revenue Growth Forecasted For Protec Mems Technology?

There's an inherent assumption that a company should be matching the industry for P/S ratios like Protec Mems Technology's to be considered reasonable.

Retrospectively, the last year delivered a frustrating 26% decrease to the company's top line. As a result, revenue from three years ago have also fallen 60% overall. Therefore, it's fair to say the revenue growth recently has been undesirable for the company.

Weighing that medium-term revenue trajectory against the broader industry's one-year forecast for expansion of 30% shows it's an unpleasant look.

In light of this, it's somewhat alarming that Protec Mems Technology's P/S sits in line with the majority of other companies. Apparently many investors in the company are way less bearish than recent times would indicate and aren't willing to let go of their stock right now. Only the boldest would assume these prices are sustainable as a continuation of recent revenue trends is likely to weigh on the share price eventually.

The Bottom Line On Protec Mems Technology's P/S

While the price-to-sales ratio shouldn't be the defining factor in whether you buy a stock or not, it's quite a capable barometer of revenue expectations.

Our look at Protec Mems Technology revealed its shrinking revenues over the medium-term haven't impacted the P/S as much as we anticipated, given the industry is set to grow. When we see revenue heading backwards in the context of growing industry forecasts, it'd make sense to expect a possible share price decline on the horizon, sending the moderate P/S lower. Unless the recent medium-term conditions improve markedly, investors will have a hard time accepting the share price as fair value.

It is also worth noting that we have found 3 warning signs for Protec Mems Technology (2 make us uncomfortable!) that you need to take into consideration.

If strong companies turning a profit tickle your fancy, then you'll want to check out this free list of interesting companies that trade on a low P/E (but have proven they can grow earnings).

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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.