Investors Give IM Co.,Ltd (KOSDAQ:101390) Shares A 27% Hiding

To the annoyance of some shareholders, IM Co.,Ltd (KOSDAQ:101390) shares are down a considerable 27% in the last month, which continues a horrid run for the company. Instead of being rewarded, shareholders who have already held through the last twelve months are now sitting on a 18% share price drop.

Following the heavy fall in price, IMLtd may be sending bullish signals at the moment with its price-to-sales (or "P/S") ratio of 0.4x, since almost half of all companies in the Electronic industry in Korea have P/S ratios greater than 0.9x and even P/S higher than 3x are not unusual. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's limited.

See our latest analysis for IMLtd

What Does IMLtd's Recent Performance Look Like?

IMLtd's revenue growth of late has been pretty similar to most other companies. One possibility is that the P/S ratio is low because investors think this modest revenue performance may begin to slide. Those who are bullish on IMLtd will be hoping that this isn't the case.

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

What Are Revenue Growth Metrics Telling Us About The Low P/S?

In order to justify its P/S ratio, IMLtd 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 6.2% last year. However, this wasn't enough as the latest three year period has seen an unpleasant 9.8% overall drop in revenue. Accordingly, shareholders would have felt downbeat about the medium-term rates of revenue growth.

Turning to the outlook, the next year should generate growth of 19% as estimated by the one analyst watching the company. Meanwhile, the rest of the industry is forecast to only expand by 16%, which is noticeably less attractive.

In light of this, it's peculiar that IMLtd's P/S sits below the majority of other companies. Apparently some shareholders are doubtful of the forecasts and have been accepting significantly lower selling prices.

The Final Word

IMLtd's P/S has taken a dip along with its share price. While the price-to-sales ratio shouldn't be the defining factor in whether you buy a stock or not, it's quite a capable barometer of revenue expectations.

IMLtd's analyst forecasts revealed that its superior revenue outlook isn't contributing to its P/S anywhere near as much as we would have predicted. There could be some major risk factors that are placing downward pressure on the P/S ratio. It appears the market could be anticipating revenue instability, because these conditions should normally provide a boost to the share price.

Before you take the next step, you should know about the 4 warning signs for IMLtd (1 is potentially serious!) that we have uncovered.

Of course, profitable companies with a history of great earnings growth are generally safer bets. So you may wish to see this free collection of other companies that have reasonable P/E ratios and have grown earnings strongly.

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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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com