Little Excitement Around Avision Inc.'s (TWSE:2380) Revenues As Shares Take 31% Pounding

The Avision Inc. (TWSE:2380) share price has fared very poorly over the last month, falling by a substantial 31%. Instead of being rewarded, shareholders who have already held through the last twelve months are now sitting on a 31% share price drop.

Following the heavy fall in price, when close to half the companies operating in Taiwan's Tech industry have price-to-sales ratios (or "P/S") above 1.5x, you may consider Avision as an enticing stock to check out with its 0.4x 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.

View our latest analysis for Avision

What Does Avision's Recent Performance Look Like?

Avision certainly has been doing a great job lately as it's been growing its revenue at a really rapid pace. One possibility is that the P/S ratio is low because investors think this strong revenue growth might actually underperform the broader industry in the near future. If that doesn't eventuate, then existing shareholders have reason to be quite optimistic about the future direction of the share price.

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

How Is Avision's Revenue Growth Trending?

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

If we review the last year of revenue growth, the company posted a terrific increase of 38%. Despite this strong recent growth, it's still struggling to catch up as its three-year revenue frustratingly shrank by 11% overall. Therefore, it's fair to say the revenue growth recently has been undesirable for the company.

In contrast to the company, the rest of the industry is expected to grow by 31% over the next year, which really puts the company's recent medium-term revenue decline into perspective.

With this information, we are not surprised that Avision is trading at a P/S lower than the industry. Nonetheless, there's no guarantee the P/S has reached a floor yet with revenue going in reverse. There's potential for the P/S to fall to even lower levels if the company doesn't improve its top-line growth.

The Bottom Line On Avision's P/S

Avision's recently weak share price has pulled its P/S back below other Tech companies. While the price-to-sales ratio shouldn't be the defining factor in whether you buy a stock or not, it's quite a capable barometer of revenue expectations.

Our examination of Avision confirms that the company's shrinking revenue over the past medium-term is a key factor in its low price-to-sales ratio, given the industry is projected to grow. Right now shareholders are accepting the low P/S as they concede future revenue probably won't provide any pleasant surprises either. If recent medium-term revenue trends continue, it's hard to see the share price moving strongly in either direction in the near future under these circumstances.

Having said that, be aware Avision is showing 1 warning sign in our investment analysis, you should know about.

If these risks are making you reconsider your opinion on Avision, explore our interactive list of high quality stocks to get an idea of what else is out there.

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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.