Kbi Metal Co., Ltd. (KOSDAQ:024840) Might Not Be As Mispriced As It Looks After Plunging 27%

Kbi Metal Co., Ltd. (KOSDAQ:024840) shares have retraced a considerable 27% in the last month, reversing a fair amount of their solid recent performance. Still, a bad month hasn't completely ruined the past year with the stock gaining 40%, which is great even in a bull market.

Even after such a large drop in price, there still wouldn't be many who think Kbi Metal's price-to-sales (or "P/S") ratio of 0.1x is worth a mention when the median P/S in Korea's Auto Components industry is similar at about 0.3x. 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.

See our latest analysis for Kbi Metal

How Has Kbi Metal Performed Recently?

As an illustration, revenue has deteriorated at Kbi Metal over the last year, which is not ideal at all. One possibility is that the P/S is moderate because investors think the company might still do enough to be in line with the broader industry in the near future. If you like the company, you'd at least be hoping this is the case so that you could potentially pick up some stock while it's not quite in favour.

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

Is There Some Revenue Growth Forecasted For Kbi Metal?

Kbi Metal's P/S ratio would be typical for a company that's only expected to deliver moderate growth, and importantly, perform in line with the industry.

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 2.1%. However, a few very strong years before that means that it was still able to grow revenue by an impressive 31% in total over the last three years. So we can start by confirming that the company has generally done a very good job of growing revenue over that time, even though it had some hiccups along the way.

Comparing that recent medium-term revenue trajectory with the industry's one-year growth forecast of 4.5% shows it's noticeably more attractive.

With this information, we find it interesting that Kbi Metal is trading at a fairly similar P/S compared to the industry. It may be that most investors are not convinced the company can maintain its recent growth rates.

The Bottom Line On Kbi Metal's P/S

With its share price dropping off a cliff, the P/S for Kbi Metal looks to be in line with the rest of the Auto Components industry. 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.

We didn't quite envision Kbi Metal's P/S sitting in line with the wider industry, considering the revenue growth over the last three-year is higher than the current industry outlook. It'd be fair to assume that potential risks the company faces could be the contributing factor to the lower than expected P/S. While recent revenue trends over the past medium-term suggest that the risk of a price decline is low, investors appear to see the likelihood of revenue fluctuations in the future.

There are also other vital risk factors to consider and we've discovered 4 warning signs for Kbi Metal (2 make us uncomfortable!) that you should be aware of before investing here.

It's important to make sure you look for a great company, not just the first idea you come across. So if growing profitability aligns with your idea of a great company, take a peek at this free list of interesting companies with strong recent earnings growth (and a low P/E).

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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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com