Some Taimide Tech. Inc. (TWSE:3645) Shareholders Look For Exit As Shares Take 25% Pounding

Taimide Tech. Inc. (TWSE:3645) shares have retraced a considerable 25% in the last month, reversing a fair amount of their solid recent performance. Looking at the bigger picture, even after this poor month the stock is up 40% in the last year.

Even after such a large drop in price, when almost half of the companies in Taiwan's Chemicals industry have price-to-sales ratios (or "P/S") below 1.6x, you may still consider Taimide Tech as a stock probably not worth researching with its 3.3x P/S ratio. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the elevated P/S.

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View our latest analysis for Taimide Tech

What Does Taimide Tech's Recent Performance Look Like?

Recent times have been quite advantageous for Taimide Tech as its revenue has been rising very briskly. Perhaps the market is expecting future revenue performance to outperform the wider market, which has seemingly got people interested in the stock. However, if this isn't the case, investors might get caught out paying too much for the stock.

Although there are no analyst estimates available for Taimide Tech, take a look at this free data-rich visualisation to see how the company stacks up on earnings, revenue and cash flow.

How Is Taimide Tech's Revenue Growth Trending?

Taimide Tech's P/S ratio would be typical for a company that's expected to deliver solid growth, and importantly, perform better than the industry.

Retrospectively, the last year delivered an exceptional 41% gain to the company's top line. Still, revenue has fallen 6.0% in total from three years ago, which is quite disappointing. Accordingly, shareholders would have felt downbeat about the medium-term rates of revenue growth.

Weighing that medium-term revenue trajectory against the broader industry's one-year forecast for expansion of 8.8% shows it's an unpleasant look.

In light of this, it's alarming that Taimide Tech's P/S sits above the majority of other companies. Apparently many investors in the company are way more bullish than recent times would indicate and aren't willing to let go of their stock at any price. Only the boldest would assume these prices are sustainable as a continuation of recent revenue trends is likely to weigh heavily on the share price eventually.

The Bottom Line On Taimide Tech's P/S

Despite the recent share price weakness, Taimide Tech's P/S remains higher than most other companies in the industry. 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.

We've established that Taimide Tech currently trades on a much higher than expected P/S since its recent revenues have been in decline over the medium-term. Right now we aren't comfortable with the high P/S as this revenue performance is highly unlikely to support such positive sentiment for long. Should recent medium-term revenue trends persist, it would pose a significant risk to existing shareholders' investments and prospective investors will have a hard time accepting the current value of the stock.

Don't forget that there may be other risks. For instance, we've identified 3 warning signs for Taimide Tech (2 are concerning) 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.