Further Upside For CHEMTRONICS.Co.,Ltd. (KOSDAQ:089010) Shares Could Introduce Price Risks After 26% Bounce

CHEMTRONICS.Co.,Ltd. (KOSDAQ:089010) shareholders are no doubt pleased to see that the share price has bounced 26% in the last month, although it is still struggling to make up recently lost ground. Not all shareholders will be feeling jubilant, since the share price is still down a very disappointing 14% in the last twelve months.

Although its price has surged higher, you could still be forgiven for feeling indifferent about CHEMTRONICS.Co.Ltd's P/S ratio of 0.5x, since the median price-to-sales (or "P/S") ratio for the Electronic industry in Korea is also close to 0.7x. However, investors might be overlooking a clear opportunity or potential setback if there is no rational basis for the P/S.

See our latest analysis for CHEMTRONICS.Co.Ltd

What Does CHEMTRONICS.Co.Ltd's P/S Mean For Shareholders?

There hasn't been much to differentiate CHEMTRONICS.Co.Ltd's and the industry's revenue growth lately. It seems that many are expecting the mediocre revenue performance to persist, which has held the P/S ratio back. Those who are bullish on CHEMTRONICS.Co.Ltd will be hoping that revenue performance can pick up, so that they can pick up the stock at a slightly lower valuation.

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

How Is CHEMTRONICS.Co.Ltd's Revenue Growth Trending?

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

Taking a look back first, we see that the company managed to grow revenues by a handy 9.2% last year. Revenue has also lifted 9.3% in aggregate from three years ago, partly thanks to the last 12 months of growth. Accordingly, shareholders would have probably been satisfied with the medium-term rates of revenue growth.

Looking ahead now, revenue is anticipated to climb by 12% during the coming year according to the only analyst following the company. Meanwhile, the rest of the industry is forecast to only expand by 10%, which is noticeably less attractive.

With this information, we find it interesting that CHEMTRONICS.Co.Ltd is trading at a fairly similar P/S compared to the industry. Apparently some shareholders are skeptical of the forecasts and have been accepting lower selling prices.

The Key Takeaway

CHEMTRONICS.Co.Ltd's stock has a lot of momentum behind it lately, which has brought its P/S level with the rest of the industry. 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.

We've established that CHEMTRONICS.Co.Ltd currently trades on a lower than expected P/S since its forecasted revenue growth is higher than the wider industry. When we see a strong revenue outlook, with growth outpacing the industry, we can only assume potential uncertainty around these figures are what might be placing slight pressure on the P/S ratio. At least the risk of a price drop looks to be subdued, but investors seem to think future revenue could see some volatility.

It is also worth noting that we have found 2 warning signs for CHEMTRONICS.Co.Ltd that you need to take into consideration.

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.