Risks Still Elevated At These Prices As Nan Ya Printed Circuit Board Corporation (TWSE:8046) Shares Dive 26%

The Nan Ya Printed Circuit Board Corporation (TWSE:8046) share price has fared very poorly over the last month, falling by a substantial 26%. For any long-term shareholders, the last month ends a year to forget by locking in a 52% share price decline.

In spite of the heavy fall in price, there still wouldn't be many who think Nan Ya Printed Circuit Board's price-to-sales (or "P/S") ratio of 2x is worth a mention when the median P/S in Taiwan's Electronic industry is similar at about 1.8x. 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 Nan Ya Printed Circuit Board

What Does Nan Ya Printed Circuit Board's P/S Mean For Shareholders?

While the industry has experienced revenue growth lately, Nan Ya Printed Circuit Board's revenue has gone into reverse gear, which is not great. Perhaps the market is expecting its poor revenue performance to improve, keeping the P/S from dropping. You'd really hope so, otherwise you're paying a relatively elevated price for a company with this sort of growth profile.

If you'd like to see what analysts are forecasting going forward, you should check out our free report on Nan Ya Printed Circuit Board.

How Is Nan Ya Printed Circuit Board's Revenue Growth Trending?

In order to justify its P/S ratio, Nan Ya Printed Circuit Board would need to produce growth that's similar to the industry.

Retrospectively, the last year delivered a frustrating 24% decrease to the company's top line. As a result, revenue from three years ago have also fallen 38% overall. So unfortunately, we have to acknowledge that the company has not done a great job of growing revenue over that time.

Shifting to the future, estimates from the eight analysts covering the company suggest revenue should grow by 23% over the next year. With the industry predicted to deliver 36% growth, the company is positioned for a weaker revenue result.

With this information, we find it interesting that Nan Ya Printed Circuit Board is trading at a fairly similar P/S compared to the industry. It seems most investors are ignoring the fairly limited growth expectations and are willing to pay up for exposure to the stock. Maintaining these prices will be difficult to achieve as this level of revenue growth is likely to weigh down the shares eventually.

The Final Word

Nan Ya Printed Circuit Board's plummeting stock price has brought its P/S back to a similar region as the rest of the industry. Typically, we'd caution against reading too much into price-to-sales ratios when settling on investment decisions, though it can reveal plenty about what other market participants think about the company.

Our look at the analysts forecasts of Nan Ya Printed Circuit Board's revenue prospects has shown that its inferior revenue outlook isn't negatively impacting its P/S as much as we would have predicted. When we see companies with a relatively weaker revenue outlook compared to the industry, we suspect the share price is at risk of declining, sending the moderate P/S lower. A positive change is needed in order to justify the current price-to-sales ratio.

There are also other vital risk factors to consider before investing and we've discovered 2 warning signs for Nan Ya Printed Circuit Board that you should be aware of.

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.