Genetec Technology Berhad (KLSE:GENETEC) Might Not Be As Mispriced As It Looks After Plunging 26%

Unfortunately for some shareholders, the Genetec Technology Berhad (KLSE:GENETEC) share price has dived 26% in the last thirty days, prolonging recent pain. The drop over the last 30 days has capped off a tough year for shareholders, with the share price down 33% in that time.

Since its price has dipped substantially, Genetec Technology Berhad's price-to-sales (or "P/S") ratio of 1.6x might make it look like a buy right now compared to the Semiconductor industry in Malaysia, where around half of the companies have P/S ratios above 3.1x and even P/S above 6x are quite common. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the reduced P/S.

AI is about to change healthcare. These 20 stocks are working on everything from early diagnostics to drug discovery. The best part - they are all under $10bn in marketcap - there is still time to get in early.

View our latest analysis for Genetec Technology Berhad

What Does Genetec Technology Berhad's Recent Performance Look Like?

While the industry has experienced revenue growth lately, Genetec Technology Berhad's revenue has gone into reverse gear, which is not great. The P/S ratio is probably low because investors think this poor revenue performance isn't going to get any better. If this is the case, then existing shareholders will probably struggle to get excited about the future direction of the share price.

Want the full picture on analyst estimates for the company? Then our free report on Genetec Technology Berhad will help you uncover what's on the horizon.

Is There Any Revenue Growth Forecasted For Genetec Technology Berhad?

In order to justify its P/S ratio, Genetec Technology Berhad would need to produce sluggish growth that's trailing the industry.

Taking a look back first, the company's revenue growth last year wasn't something to get excited about as it posted a disappointing decline of 20%. This means it has also seen a slide in revenue over the longer-term as revenue is down 13% in total over the last three years. Accordingly, shareholders would have felt downbeat about the medium-term rates of revenue growth.

Turning to the outlook, the next three years should generate growth of 15% each year as estimated by the only analyst watching the company. Meanwhile, the rest of the industry is forecast to expand by 15% per annum, which is not materially different.

With this in consideration, we find it intriguing that Genetec Technology Berhad's P/S is lagging behind its industry peers. It may be that most investors are not convinced the company can achieve future growth expectations.

What We Can Learn From Genetec Technology Berhad's P/S?

Genetec Technology Berhad's P/S has taken a dip along with its share price. 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 examination of Genetec Technology Berhad's revealed that its P/S remains low despite analyst forecasts of revenue growth matching the wider industry. Despite average revenue growth estimates, there could be some unobserved threats keeping the P/S low. It appears some are indeed anticipating revenue instability, because these conditions should normally provide more support to the share price.

It's always necessary to consider the ever-present spectre of investment risk. We've identified 2 warning signs with Genetec Technology Berhad, and understanding them should be part of your investment process.

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.

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

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.