Why We're Not Concerned Yet About CHEMTRONICS.Co.,Ltd.'s (KOSDAQ:089010) 25% Share Price Plunge

CHEMTRONICS.Co.,Ltd. (KOSDAQ:089010) shareholders that were waiting for something to happen have been dealt a blow with a 25% share price drop in the last month. Instead of being rewarded, shareholders who have already held through the last twelve months are now sitting on a 37% share price drop.

In spite of the heavy fall in price, it's still not a stretch to say that CHEMTRONICS.Co.Ltd's price-to-sales (or "P/S") ratio of 0.4x right now seems quite "middle-of-the-road" compared to the Electronic industry in Korea, where the median P/S ratio is around 0.6x. While this might not raise any eyebrows, if the P/S ratio is not justified investors could be missing out on a potential opportunity or ignoring looming disappointment.

See our latest analysis for CHEMTRONICS.Co.Ltd

How CHEMTRONICS.Co.Ltd Has Been Performing

With revenue growth that's superior to most other companies of late, CHEMTRONICS.Co.Ltd has been doing relatively well. One possibility is that the P/S ratio is moderate because investors think this strong revenue performance might be about to tail off. If you like the company, you'd be hoping this isn't the case so that you could potentially pick up some stock while it's not quite in favour.

Want the full picture on analyst estimates for the company? Then our free report on CHEMTRONICS.Co.Ltd will help you uncover what's on the horizon.

Do Revenue Forecasts Match The P/S Ratio?

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

If we review the last year of revenue growth, the company posted a worthy increase of 9.2%. Revenue has also lifted 9.3% in aggregate from three years ago, partly thanks to the last 12 months of growth. Therefore, it's fair to say the revenue growth recently has been respectable for the company.

Shifting to the future, estimates from the sole analyst covering the company suggest revenue should grow by 11% over the next year. With the industry predicted to deliver 11% growth , the company is positioned for a comparable revenue result.

With this in mind, it makes sense that CHEMTRONICS.Co.Ltd'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 CHEMTRONICS.Co.Ltd's P/S?

CHEMTRONICS.Co.Ltd's plummeting stock price has brought its P/S back to a similar region as the rest of the industry. 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.

Our look at CHEMTRONICS.Co.Ltd's revenue growth estimates show that its P/S is about what we expect, as both metrics follow closely with the industry averages. Right now shareholders are comfortable with the P/S as they are quite confident future revenue won't throw up any surprises. All things considered, if the P/S and revenue estimates contain no major shocks, then it's hard to see the share price moving strongly in either direction in the near future.

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

It's important to make sure you look for a great company, not just the first idea you come across. So if growing profitability aligns with your idea of a great company, take a peek at this free list of interesting companies with strong recent earnings growth (and a low P/E).

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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.