The Market Doesn't Like What It Sees From SIMMTECH Co., Ltd.'s (KOSDAQ:222800) Revenues Yet As Shares Tumble 27%

Unfortunately for some shareholders, the SIMMTECH Co., Ltd. (KOSDAQ:222800) share price has dived 27% in the last thirty days, prolonging recent pain. For any long-term shareholders, the last month ends a year to forget by locking in a 62% share price decline.

Since its price has dipped substantially, given about half the companies operating in Korea's Semiconductor industry have price-to-sales ratios (or "P/S") above 1.3x, you may consider SIMMTECH as an attractive investment with its 0.3x P/S ratio. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the reduced P/S.

View our latest analysis for SIMMTECH

How Has SIMMTECH Performed Recently?

SIMMTECH hasn't been tracking well recently as its declining revenue compares poorly to other companies, which have seen some growth in their revenues on average. It seems that many are expecting the poor revenue performance to persist, which has repressed the P/S ratio. If you still 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.

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

Is There Any Revenue Growth Forecasted For SIMMTECH?

SIMMTECH'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.

Retrospectively, the last year delivered a frustrating 5.6% decrease to the company's top line. At least revenue has managed not to go completely backwards from three years ago in aggregate, thanks to the earlier period of growth. So it appears to us that the company has had a mixed result in terms of growing revenue over that time.

Shifting to the future, estimates from the six analysts covering the company suggest revenue should grow by 9.5% over the next year. With the industry predicted to deliver 62% growth, the company is positioned for a weaker revenue result.

With this information, we can see why SIMMTECH is trading at a P/S lower than the industry. Apparently many shareholders weren't comfortable holding on while the company is potentially eyeing a less prosperous future.

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

SIMMTECH's recently weak share price has pulled its P/S back below other Semiconductor companies. 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 SIMMTECH's analyst forecasts revealed that its inferior revenue outlook is contributing to its low P/S. Right now shareholders are accepting the low P/S as they concede future revenue probably won't provide any pleasant surprises. It's hard to see the share price rising strongly in the near future under these circumstances.

You should always think about risks. Case in point, we've spotted 2 warning signs for SIMMTECH you should be aware 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.