Little Excitement Around Min Aik Technology Co., Ltd.'s (TWSE:3060) Revenues As Shares Take 27% Pounding

Min Aik Technology Co., Ltd. (TWSE:3060) shares have had a horrible month, losing 27% after a relatively good period beforehand. Looking at the bigger picture, even after this poor month the stock is up 28% in the last year.

Following the heavy fall in price, Min Aik Technology's price-to-sales (or "P/S") ratio of 1.2x might make it look like a buy right now compared to the Electronic industry in Taiwan, where around half of the companies have P/S ratios above 1.7x and even P/S above 4x 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.

View our latest analysis for Min Aik Technology

What Does Min Aik Technology's P/S Mean For Shareholders?

Min Aik Technology has been doing a decent job lately as it's been growing revenue at a reasonable pace. It might be that many expect the respectable revenue performance to degrade, which has repressed the P/S. Those who are bullish on Min Aik Technology will be hoping that this isn't the case, so that they can pick up the stock at a lower valuation.

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

How Is Min Aik Technology's Revenue Growth Trending?

The only time you'd be truly comfortable seeing a P/S as low as Min Aik Technology's is when the company's growth is on track to lag the industry.

If we review the last year of revenue growth, the company posted a worthy increase of 3.9%. However, this wasn't enough as the latest three year period has seen an unpleasant 20% overall drop in revenue. So unfortunately, we have to acknowledge that the company has not done a great job of growing revenue over that time.

Weighing that medium-term revenue trajectory against the broader industry's one-year forecast for expansion of 18% shows it's an unpleasant look.

With this information, we are not surprised that Min Aik Technology is trading at a P/S lower than the industry. However, we think shrinking revenues are unlikely to lead to a stable P/S over the longer term, which could set up shareholders for future disappointment. There's potential for the P/S to fall to even lower levels if the company doesn't improve its top-line growth.

The Final Word

The southerly movements of Min Aik Technology's shares means its P/S is now sitting at a pretty low level. 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.

As we suspected, our examination of Min Aik Technology revealed its shrinking revenue over the medium-term is contributing to its low P/S, given the industry is set to grow. At this stage investors feel the potential for an improvement in revenue isn't great enough to justify a higher P/S ratio. 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 Min Aik Technology is showing 1 warning sign in our investment analysis, you should know about.

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.

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