What You Can Learn From ADTechnology Co.,Ltd.'s (KOSDAQ:200710) P/S After Its 26% Share Price Crash

To the annoyance of some shareholders, ADTechnology Co.,Ltd. (KOSDAQ:200710) shares are down a considerable 26% in the last month, which continues a horrid run for the company. Instead of being rewarded, shareholders who have already held through the last twelve months are now sitting on a 38% share price drop.

Even after such a large drop in price, you could still be forgiven for feeling indifferent about ADTechnologyLtd's P/S ratio of 1.7x, since the median price-to-sales (or "P/S") ratio for the Semiconductor industry in Korea is also close to 1.3x. However, investors might be overlooking a clear opportunity or potential setback if there is no rational basis for the P/S.

View our latest analysis for ADTechnologyLtd

How ADTechnologyLtd Has Been Performing

Recent times haven't been great for ADTechnologyLtd as its revenue has been rising slower than most other companies. One possibility is that the P/S ratio is moderate because investors think this lacklustre revenue performance will turn around. If not, then existing shareholders may be a little nervous about the viability of the share price.

If you'd like to see what analysts are forecasting going forward, you should check out our free report on ADTechnologyLtd.

Is There Some Revenue Growth Forecasted For ADTechnologyLtd?

In order to justify its P/S ratio, ADTechnologyLtd would need to produce growth that's similar to the industry.

Retrospectively, the last year delivered an exceptional 32% gain to the company's top line. Still, revenue has fallen 65% in total from three years ago, which is quite disappointing. Accordingly, shareholders would have felt downbeat about the medium-term rates of revenue growth.

Looking ahead now, revenue is anticipated to climb by 66% during the coming year according to the lone analyst following the company. With the industry predicted to deliver 63% growth , the company is positioned for a comparable revenue result.

With this in mind, it makes sense that ADTechnologyLtd's P/S is closely matching its industry peers. Apparently shareholders are comfortable to simply hold on while the company is keeping a low profile.

What We Can Learn From ADTechnologyLtd's P/S?

Following ADTechnologyLtd's share price tumble, its P/S is just clinging on to the industry median P/S. 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.

We've seen that ADTechnologyLtd maintains an adequate P/S seeing as its revenue growth figures match the rest of the industry. Right now shareholders are comfortable with the P/S as they are quite confident future revenue won't throw up any surprises. Unless these conditions change, they will continue to support the share price at these levels.

Before you take the next step, you should know about the 1 warning sign for ADTechnologyLtd that we have uncovered.

If you're unsure about the strength of ADTechnologyLtd's business, why not explore our interactive list of stocks with solid business fundamentals for some other companies you may have missed.

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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.