Investors Still Waiting For A Pull Back In Hanon Systems (KRX:018880)

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 Hanon Systems' (KRX:018880) P/S ratio, which comes in at about the same. 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.

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See our latest analysis for Hanon Systems

What Does Hanon Systems' P/S Mean For Shareholders?

Hanon Systems could be doing better as it's been growing revenue less than most other companies lately. One possibility is that the P/S ratio is moderate because investors think this lacklustre 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 Hanon Systems' future stacks up against the industry? In that case, our free report is a great place to start.

Is There Some Revenue Growth Forecasted For Hanon Systems?

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

If we review the last year of revenue growth, the company posted a worthy increase of 8.0%. This was backed up an excellent period prior to see revenue up by 36% in total over the last three years. Accordingly, shareholders would have definitely welcomed those medium-term rates of revenue growth.

Looking ahead now, revenue is anticipated to climb by 5.8% each year during the coming three years according to the analysts following the company. With the industry predicted to deliver 5.9% growth per year, the company is positioned for a comparable revenue result.

With this information, we can see why Hanon Systems is trading at a fairly similar P/S to the industry. Apparently shareholders are comfortable to simply hold on while the company is keeping a low profile.

The Bottom Line On Hanon Systems' P/S

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.

A Hanon Systems' P/S seems about right to us given the knowledge that analysts are forecasting a revenue outlook that is similar to the Auto Components industry. Right now shareholders are comfortable with the P/S as they are quite confident future revenue won't throw up any surprises. If all things remain constant, the possibility of a drastic share price movement remains fairly remote.

Don't forget that there may be other risks. For instance, we've identified 2 warning signs for Hanon Systems (1 is a bit concerning) you should be aware of.

Of course, profitable companies with a history of great earnings growth are generally safer bets. So you may wish to see this free collection of other companies that have reasonable P/E ratios and have grown earnings strongly.

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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.