DA Technology Co.,Ltd.'s (KOSDAQ:196490) 56% Dip In Price Shows Sentiment Is Matching Revenues

The DA Technology Co.,Ltd. (KOSDAQ:196490) share price has fared very poorly over the last month, falling by a substantial 56%. The recent drop completes a disastrous twelve months for shareholders, who are sitting on a 78% loss during that time.

After such a large drop in price, DA TechnologyLtd's price-to-sales (or "P/S") ratio of 0.4x might make it look like a buy right now compared to the Semiconductor industry in Korea, where around half of the companies have P/S ratios above 2x and even P/S above 4x are quite common. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's limited.

View our latest analysis for DA TechnologyLtd

How DA TechnologyLtd Has Been Performing

DA TechnologyLtd certainly has been doing a great job lately as it's been growing its revenue at a really rapid pace. It might be that many expect the strong revenue performance to degrade substantially, which has repressed the P/S ratio. If that doesn't eventuate, then existing shareholders have reason to be quite 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 DA TechnologyLtd will help you shine a light on its historical performance.

How Is DA TechnologyLtd's Revenue Growth Trending?

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

If we review the last year of revenue growth, the company posted a terrific increase of 68%. The strong recent performance means it was also able to grow revenue by 161% in total over the last three years. Therefore, it's fair to say the revenue growth recently has been superb for the company.

This is in contrast to the rest of the industry, which is expected to grow by 95% over the next year, materially higher than the company's recent medium-term annualised growth rates.

With this information, we can see why DA TechnologyLtd 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 DA TechnologyLtd's P/S Mean For Investors?

DA TechnologyLtd'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.

In line with expectations, DA TechnologyLtd maintains its low P/S on the weakness of its recent three-year growth being lower than the wider industry forecast. Right now shareholders are accepting the low P/S as they concede future revenue probably won't provide any pleasant surprises. If recent medium-term revenue trends continue, it's hard to see the share price experience a reversal of fortunes anytime soon.

Before you take the next step, you should know about the 5 warning signs for DA TechnologyLtd (3 are a bit unpleasant!) that we have uncovered.

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.