Not Many Are Piling Into D'nonce Technology Bhd. (KLSE:DNONCE) Stock Yet As It Plummets 40%

D'nonce Technology Bhd. (KLSE:DNONCE) shareholders that were waiting for something to happen have been dealt a blow with a 40% share price drop in the last month. The recent drop completes a disastrous twelve months for shareholders, who are sitting on a 60% loss during that time.

Following the heavy fall in price, given about half the companies operating in Malaysia's Packaging industry have price-to-sales ratios (or "P/S") above 0.7x, you may consider D'nonce Technology Bhd as an attractive investment with its 0.1x 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 limited.

See our latest analysis for D'nonce Technology Bhd

How D'nonce Technology Bhd Has Been Performing

Revenue has risen firmly for D'nonce Technology Bhd recently, which is pleasing to see. Perhaps the market is expecting this acceptable revenue performance to take a dive, which has kept the P/S suppressed. Those who are bullish on D'nonce Technology Bhd will be hoping that this isn't the case, so that they can pick up the stock at a lower valuation.

Want the full picture on earnings, revenue and cash flow for the company? Then our free report on D'nonce Technology Bhd will help you shine a light on its historical performance.

How Is D'nonce Technology Bhd's Revenue Growth Trending?

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

Taking a look back first, we see that the company managed to grow revenues by a handy 9.5% last year. The latest three year period has also seen a 5.8% overall rise in revenue, aided somewhat by its short-term performance. So we can start by confirming that the company has actually done a good job of growing revenue over that time.

Weighing the recent medium-term upward revenue trajectory against the broader industry's one-year forecast for contraction of 2.1% shows it's a great look while it lasts.

In light of this, it's quite peculiar that D'nonce Technology Bhd's P/S sits below the majority of other companies. It looks like most investors are not convinced at all that the company can maintain its recent positive growth rate in the face of a shrinking broader industry.

What We Can Learn From D'nonce Technology Bhd's P/S?

D'nonce Technology Bhd's recently weak share price has pulled its P/S back below other Packaging companies. It's argued the price-to-sales ratio is an inferior measure of value within certain industries, but it can be a powerful business sentiment indicator.

Upon analysing the past data, we see it is unexpected that D'nonce Technology Bhd is currently trading at a lower P/S than the rest of the industry given that its revenue growth in the past three-year years is exceeding expectations in a challenging industry. One assumption would be that there are some underlying risks to revenue that are keeping the P/S from rising to match the its strong performance. The most obvious risk is that its revenue trajectory may not keep outperforming under these tough industry conditions. At least the risk of a price drop looks to be subdued, but investors think future revenue could see a lot of volatility.

There are also other vital risk factors to consider before investing and we've discovered 4 warning signs for D'nonce Technology Bhd that you should be aware of.

If companies with solid past earnings growth is up your alley, you may wish to see this free collection of other companies with strong earnings growth and low P/E ratios.

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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.