Andes Technology Corporation's (TWSE:6533) Stock Retreats 27% But Revenues Haven't Escaped The Attention Of Investors

Andes Technology Corporation (TWSE:6533) shareholders won't be pleased to see that the share price has had a very rough month, dropping 27% and undoing the prior period's positive performance. The drop over the last 30 days has capped off a tough year for shareholders, with the share price down 27% in that time.

Even after such a large drop in price, you could still be forgiven for thinking Andes Technology is a stock to steer clear of with a price-to-sales ratios (or "P/S") of 15.4x, considering almost half the companies in Taiwan's Semiconductor industry have P/S ratios below 3.6x. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the highly elevated P/S.

See our latest analysis for Andes Technology

How Andes Technology Has Been Performing

There hasn't been much to differentiate Andes Technology's and the industry's revenue growth lately. It might be that many expect the mediocre revenue performance to strengthen positively, which has kept the P/S ratio from falling. If not, then existing shareholders may be a little nervous about the viability of the share price.

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

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

Andes Technology's P/S ratio would be typical for a company that's expected to deliver very strong growth, and importantly, perform much better than the industry.

Retrospectively, the last year delivered a decent 11% gain to the company's revenues. This was backed up an excellent period prior to see revenue up by 67% in total over the last three years. Therefore, it's fair to say the revenue growth recently has been superb for the company.

Turning to the outlook, the next year should generate growth of 38% as estimated by the four analysts watching the company. With the industry only predicted to deliver 26%, the company is positioned for a stronger revenue result.

In light of this, it's understandable that Andes Technology's 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 Bottom Line On Andes Technology's P/S

A significant share price dive has done very little to deflate Andes Technology's very lofty P/S. 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.

We've established that Andes Technology maintains its high P/S on the strength of its forecasted revenue growth being higher than the the rest of the Semiconductor industry, as expected. Right now shareholders are comfortable with the P/S as they are quite confident future revenues aren't under threat. Unless the analysts have really missed the mark, these strong revenue forecasts should keep the share price buoyant.

The company's balance sheet is another key area for risk analysis. Take a look at our free balance sheet analysis for Andes Technology with six simple checks on some of these key factors.

If strong companies turning a profit tickle your fancy, then you'll want to check out this free list of interesting companies that trade on a low P/E (but have proven they can grow earnings).

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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.

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