Market Cool On Ostin Technology Group Co., Ltd.'s (NASDAQ:OST) Revenues
With a price-to-sales (or "P/S") ratio of 0.1x Ostin Technology Group Co., Ltd. (NASDAQ:OST) may be sending bullish signals at the moment, given that almost half of all the Electronic companies in the United States have P/S ratios greater than 1.6x and even P/S higher than 6x are not unusual. 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 Ostin Technology Group
How Ostin Technology Group Has Been Performing
For example, consider that Ostin Technology Group's financial performance has been poor lately as its revenue has been in decline. It might be that many expect the disappointing revenue performance to continue or accelerate, which has repressed the P/S. Those who are bullish on Ostin Technology Group 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 Ostin Technology Group, take a look at this free data-rich visualisation to see how the company stacks up on earnings, revenue and cash flow.
Do Revenue Forecasts Match The Low P/S Ratio?
There's an inherent assumption that a company should underperform the industry for P/S ratios like Ostin Technology Group's to be considered reasonable.
Taking a look back first, the company's revenue growth last year wasn't something to get excited about as it posted a disappointing decline of 37%. Even so, admirably revenue has lifted 126% in aggregate from three years ago, notwithstanding the last 12 months. Although it's been a bumpy ride, it's still fair to say the revenue growth recently has been more than adequate for the company.
Comparing that to the industry, which is only predicted to deliver 11% growth in the next 12 months, the company's momentum is stronger based on recent medium-term annualised revenue results.
In light of this, it's peculiar that Ostin Technology Group's P/S sits below the majority of other companies. Apparently some shareholders believe the recent performance has exceeded its limits and have been accepting significantly lower selling prices.
What Does Ostin Technology Group's P/S Mean For Investors?
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.
Our examination of Ostin Technology Group revealed its three-year revenue trends aren't boosting its P/S anywhere near as much as we would have predicted, given they look better than current industry expectations. When we see strong revenue with faster-than-industry growth, we assume there are some significant underlying risks to the company's ability to make money which is applying downwards pressure on the P/S ratio. It appears many are indeed anticipating revenue instability, because the persistence of these recent medium-term conditions would normally provide a boost to the share price.
Having said that, be aware Ostin Technology Group is showing 7 warning signs in our investment analysis, and 1 of those can't be ignored.
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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