Stock Analysis

Take Care Before Diving Into The Deep End On Orient Precision Industries Inc (KOSDAQ:065500)

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There wouldn't be many who think Orient Precision Industries Inc's (KOSDAQ:065500) price-to-sales (or "P/S") ratio of 0.3x is worth a mention when the median P/S for the Auto Components industry in Korea is very similar. 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 Orient Precision Industries

KOSDAQ:A065500 Price to Sales Ratio vs Industry March 23rd 2024

What Does Orient Precision Industries' Recent Performance Look Like?

With revenue growth that's exceedingly strong of late, Orient Precision Industries has been doing very well. Perhaps the market is expecting future revenue performance to taper off, which has kept the P/S from rising. Those who are bullish on Orient Precision Industries will be hoping that this isn't the case, so that they can pick up the stock at a lower valuation.

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

Do Revenue Forecasts Match The P/S Ratio?

The only time you'd be comfortable seeing a P/S like Orient Precision Industries' is when the company's growth is tracking the industry closely.

Taking a look back first, we see that the company grew revenue by an impressive 64% last year. The latest three year period has also seen an excellent 136% overall rise in revenue, aided by its short-term performance. So we can start by confirming that the company has done a great job of growing revenue over that time.

This is in contrast to the rest of the industry, which is expected to grow by 5.6% over the next year, materially lower than the company's recent medium-term annualised growth rates.

In light of this, it's curious that Orient Precision Industries' P/S sits in line with the majority of other companies. It may be that most investors are not convinced the company can maintain its recent growth rates.

The Final Word

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.

To our surprise, Orient Precision Industries revealed its three-year revenue trends aren't contributing to its P/S as much as we would have predicted, given they look better than current industry expectations. There could be some unobserved threats to revenue preventing the P/S ratio from matching this positive performance. It appears some are indeed anticipating revenue instability, because the persistence of these recent medium-term conditions would normally provide a boost to the share price.

And what about other risks? Every company has them, and we've spotted 1 warning sign for Orient Precision Industries you should know about.

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

Valuation is complex, but we're helping make it simple.

Find out whether Orient Precision Industries is potentially over or undervalued by checking out our comprehensive analysis, which includes fair value estimates, risks and warnings, dividends, insider transactions and financial health.

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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.