Investors Aren't Entirely Convinced By DRB Holding Co., Ltd.'s (KRX:004840) Revenues

With a median price-to-sales (or "P/S") ratio of close to 0.2x in the Auto Components industry in Korea, you could be forgiven for feeling indifferent about DRB Holding Co., Ltd.'s (KRX:004840) P/S ratio of 0.1x. 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 DRB Holding

How Has DRB Holding Performed Recently?

Revenue has risen at a steady rate over the last year for DRB Holding, which is generally not a bad outcome. It might be that many expect the respectable revenue performance to only match most other companies over the coming period, which has kept the P/S from rising. If not, then at least existing shareholders probably aren't too pessimistic about the future direction of the share price.

We don't have analyst forecasts, but you can see how recent trends are setting up the company for the future by checking out our free report on DRB Holding's earnings, revenue and cash flow.

Is There Some Revenue Growth Forecasted For DRB Holding?

In order to justify its P/S ratio, DRB Holding would need to produce growth that's similar to the industry.

Retrospectively, the last year delivered a decent 5.8% gain to the company's revenues. This was backed up an excellent period prior to see revenue up by 48% in total over the last three years. So we can start by confirming that the company has done a great job of growing revenues over that time.

When compared to the industry's one-year growth forecast of 4.9%, the most recent medium-term revenue trajectory is noticeably more alluring

With this information, we find it interesting that DRB Holding 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 Key Takeaway

While the price-to-sales ratio shouldn't be the defining factor in whether you buy a stock or not, it's quite a capable barometer of revenue expectations.

We didn't quite envision DRB Holding'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. When we see strong revenue with faster-than-industry growth, we can only assume potential risks are what might be placing pressure on the P/S ratio. 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.

Before you take the next step, you should know about the 3 warning signs for DRB Holding that we have uncovered.

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.