There's No Escaping SIMMTECH Co., Ltd.'s (KOSDAQ:222800) Muted Revenues Despite A 27% Share Price Rise

Despite an already strong run, SIMMTECH Co., Ltd. (KOSDAQ:222800) shares have been powering on, with a gain of 27% in the last thirty days. Looking back a bit further, it's encouraging to see the stock is up 76% in the last year.

Even after such a large jump in price, SIMMTECH's price-to-sales (or "P/S") ratio of 0.8x might still 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 1.6x and even P/S above 4x are quite common. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the reduced P/S.

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View our latest analysis for SIMMTECH

How SIMMTECH Has Been Performing

SIMMTECH could be doing better as it's been growing revenue less than most other companies lately. The P/S ratio is probably low because investors think this lacklustre revenue performance isn't going to get any better. If this is the case, then existing shareholders will probably struggle to get excited about the future direction of the share price.

Keen to find out how analysts think SIMMTECH's future stacks up against the industry? In that case, our free report is a great place to start.

How Is SIMMTECH's Revenue Growth Trending?

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

Taking a look back first, we see that the company managed to grow revenues by a handy 6.8% last year. However, this wasn't enough as the latest three year period has seen an unpleasant 23% overall drop in revenue. So unfortunately, we have to acknowledge that the company has not done a great job of growing revenue over that time.

Turning to the outlook, the next year should generate growth of 14% as estimated by the six analysts watching the company. That's shaping up to be materially lower than the 25% growth forecast for the broader industry.

With this in consideration, its clear as to why SIMMTECH's P/S is falling short industry peers. It seems most investors are expecting to see limited future growth and are only willing to pay a reduced amount for the stock.

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

The latest share price surge wasn't enough to lift SIMMTECH's P/S close to the industry median. Typically, we'd caution against reading too much into price-to-sales ratios when settling on investment decisions, though it can reveal plenty about what other market participants think about the company.

As we suspected, our examination of SIMMTECH's analyst forecasts revealed that its inferior revenue outlook is contributing to its low P/S. At this stage investors feel the potential for an improvement in revenue isn't great enough to justify a higher P/S ratio. The company will need a change of fortune to justify the P/S rising higher in the future.

Before you take the next step, you should know about the 2 warning signs for SIMMTECH (1 can't be ignored!) that we have uncovered.

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.