NewFlex Technology Co., Ltd.'s (KOSDAQ:085670) Popularity With Investors Under Threat As Stock Sinks 29%

NewFlex Technology Co., Ltd. (KOSDAQ:085670) shareholders won't be pleased to see that the share price has had a very rough month, dropping 29% and undoing the prior period's positive performance. The drop over the last 30 days has capped off a tough year for shareholders, with the share price down 24% in that time.

Even after such a large drop in price, there still wouldn't be many who think NewFlex Technology's price-to-sales (or "P/S") ratio of 0.5x is worth a mention when the median P/S in Korea's Electronic industry is similar at about 0.6x. However, investors might be overlooking a clear opportunity or potential setback if there is no rational basis for the P/S.

Check out our latest analysis for NewFlex Technology

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

NewFlex Technology 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. Perhaps the market is expecting its poor revenue performance to improve, keeping the P/S from dropping. You'd really hope so, otherwise you're paying a relatively elevated price for a company with this sort of growth profile.

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

How Is NewFlex Technology's Revenue Growth Trending?

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

In reviewing the last year of financials, we were disheartened to see the company's revenues fell to the tune of 12%. However, a few very strong years before that means that it was still able to grow revenue by an impressive 30% in total over the last three years. So we can start by confirming that the company has generally done a very good job of growing revenue over that time, even though it had some hiccups along the way.

Looking ahead now, revenue is anticipated to climb by 3.3% during the coming year according to the sole analyst following the company. That's shaping up to be materially lower than the 6.4% growth forecast for the broader industry.

With this information, we find it interesting that NewFlex Technology is trading at a fairly similar P/S compared to the industry. Apparently many investors in the company are less bearish than analysts indicate and aren't willing to let go of their stock right now. Maintaining these prices will be difficult to achieve as this level of revenue growth is likely to weigh down the shares eventually.

What Does NewFlex Technology's P/S Mean For Investors?

With its share price dropping off a cliff, the P/S for NewFlex Technology looks to be in line with the rest of the Electronic industry. 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.

Given that NewFlex Technology's revenue growth projections are relatively subdued in comparison to the wider industry, it comes as a surprise to see it trading at its current P/S ratio. When we see companies with a relatively weaker revenue outlook compared to the industry, we suspect the share price is at risk of declining, sending the moderate P/S lower. Circumstances like this present a risk to current and prospective investors who may see share prices fall if the low revenue growth impacts the sentiment.

Before you take the next step, you should know about the 2 warning signs for NewFlex Technology that we have uncovered.

If you're unsure about the strength of NewFlex Technology'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.