With Hyundai Wia Corporation (KRX:011210) It Looks Like You'll Get What You Pay For

It's not a stretch to say that Hyundai Wia Corporation's (KRX:011210) price-to-sales (or "P/S") ratio of 0.1x right now seems quite "middle-of-the-road" for companies in the Auto Components industry in Korea, where the median P/S ratio is around 0.2x. However, investors might be overlooking a clear opportunity or potential setback if there is no rational basis for the P/S.

Check out our latest analysis for Hyundai Wia

What Does Hyundai Wia's Recent Performance Look Like?

While the industry has experienced revenue growth lately, Hyundai Wia's revenue has gone into reverse gear, which is not great. One possibility is that the P/S ratio is moderate because investors think this poor revenue performance will turn around. If not, then existing shareholders may be a little nervous about the viability of the share price.

Keen to find out how analysts think Hyundai Wia's future stacks up against the industry? In that case, our free report is a great place to start.

What Are Revenue Growth Metrics Telling Us About The P/S?

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

Retrospectively, the last year delivered a frustrating 1.6% decrease to the company's top line. This has soured the latest three-year period, which nevertheless managed to deliver a decent 15% overall rise in revenue. So we can start by confirming that the company has generally done a good job of growing revenue over that time, even though it had some hiccups along the way.

Turning to the outlook, the next three years should generate growth of 4.4% per annum as estimated by the analysts watching the company. With the industry predicted to deliver 5.8% growth each year, the company is positioned for a comparable revenue result.

In light of this, it's understandable that Hyundai Wia's P/S sits in line with the majority of other companies. Apparently shareholders are comfortable to simply hold on while the company is keeping a low profile.

What Does Hyundai Wia'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 look at Hyundai Wia's revenue growth estimates show that its P/S is about what we expect, as both metrics follow closely with the industry averages. Right now shareholders are comfortable with the P/S as they are quite confident future revenue won't throw up any surprises. Unless these conditions change, they will continue to support the share price at these levels.

The company's balance sheet is another key area for risk analysis. You can assess many of the main risks through our free balance sheet analysis for Hyundai Wia with six simple checks.

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.