Min Aik Technology Co., Ltd.'s (TWSE:3060) 28% Price Boost Is Out Of Tune With Revenues

Despite an already strong run, Min Aik Technology Co., Ltd. (TWSE:3060) shares have been powering on, with a gain of 28% in the last thirty days. The annual gain comes to 109% following the latest surge, making investors sit up and take notice.

Even after such a large jump in price, you could still be forgiven for feeling indifferent about Min Aik Technology's P/S ratio of 1.7x, since the median price-to-sales (or "P/S") ratio for the Electronic industry in Taiwan is also close to 1.6x. Although, it's not wise to simply ignore the P/S without explanation as investors may be disregarding a distinct opportunity or a costly mistake.

Check out 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. Perhaps the expectation moving forward is that the revenue growth will track in line with the wider industry for the near term, which has kept the P/S subdued. If you like the company, you'd be hoping this isn't the case so that you could potentially pick up some stock while it's not quite in favour.

Want the full picture on earnings, revenue and cash flow for the company? Then our free report on Min Aik Technology will help you shine a light on its historical performance.

How Is Min Aik Technology's Revenue Growth Trending?

There's an inherent assumption that a company should be matching the industry for P/S ratios like Min Aik Technology's to be considered reasonable.

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. 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 16% shows it's an unpleasant look.

In light of this, it's somewhat alarming that Min Aik Technology's P/S sits in line with the majority of other companies. Apparently many investors in the company are way less bearish than recent times would indicate and aren't willing to let go of their stock right now. There's a good chance existing shareholders are setting themselves up for future disappointment if the P/S falls to levels more in line with the recent negative growth rates.

What We Can Learn From Min Aik Technology's P/S?

Min Aik Technology appears to be back in favour with a solid price jump bringing its P/S back in line with 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 find it unexpected that Min Aik Technology trades at a P/S ratio that is comparable to the rest of the industry, despite experiencing declining revenues during the medium-term, while the industry as a whole is expected to grow. When we see revenue heading backwards in the context of growing industry forecasts, it'd make sense to expect a possible share price decline on the horizon, sending the moderate P/S lower. Unless the the circumstances surrounding the recent medium-term improve, it wouldn't be wrong to expect a a difficult period ahead for the company's shareholders.

It is also worth noting that we have found 1 warning sign for Min Aik Technology that you need to take into consideration.

If you're unsure about the strength of Min Aik Technology's business, why not explore our interactive list of stocks with solid business fundamentals for some other companies you may have missed.

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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.