Lotte Energy Materials Corporation's (KRX:020150) Share Price Is Still Matching Investor Opinion Despite 28% Slump

Lotte Energy Materials Corporation (KRX:020150) shareholders won't be pleased to see that the share price has had a very rough month, dropping 28% and undoing the prior period's positive performance. For any long-term shareholders, the last month ends a year to forget by locking in a 55% share price decline.

Even after such a large drop in price, when almost half of the companies in Korea's Electronic industry have price-to-sales ratios (or "P/S") below 0.6x, you may still consider Lotte Energy Materials as a stock probably not worth researching with its 1.2x P/S ratio. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's as high as it is.

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See our latest analysis for Lotte Energy Materials

How Has Lotte Energy Materials Performed Recently?

With revenue growth that's superior to most other companies of late, Lotte Energy Materials has been doing relatively well. It seems the market expects this form will continue into the future, hence the elevated P/S ratio. If not, then existing shareholders might be a little nervous about the viability of the share price.

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

How Is Lotte Energy Materials' Revenue Growth Trending?

The only time you'd be truly comfortable seeing a P/S as high as Lotte Energy Materials' is when the company's growth is on track to outshine the industry.

Retrospectively, the last year delivered a decent 12% gain to the company's revenues. Pleasingly, revenue has also lifted 31% 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 superb for the company.

Turning to the outlook, the next three years should generate growth of 17% each year as estimated by the eight analysts watching the company. Meanwhile, the rest of the industry is forecast to only expand by 11% per annum, which is noticeably less attractive.

In light of this, it's understandable that Lotte Energy Materials' P/S sits above the majority of other companies. Apparently shareholders aren't keen to offload something that is potentially eyeing a more prosperous future.

The Final Word

Lotte Energy Materials' P/S remain high even after its stock plunged. 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 Lotte Energy Materials' analyst forecasts revealed that its superior revenue outlook is contributing to its high P/S. Right now shareholders are comfortable with the P/S as they are quite confident future revenues aren't under threat. It's hard to see the share price falling strongly in the near future under these circumstances.

Before you settle on your opinion, we've discovered 1 warning sign for Lotte Energy Materials that you should be aware of.

If you're unsure about the strength of Lotte Energy Materials' 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.