Many Still Looking Away From HL Mando Corporation (KRX:204320)

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 HL Mando Corporation's (KRX:204320) 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.

See our latest analysis for HL Mando

How Has HL Mando Performed Recently?

HL Mando's revenue growth of late has been pretty similar to most other companies. Perhaps the market is expecting future revenue performance to show no drastic signs of changing, justifying the P/S being at current levels. If this is the case, then at least existing shareholders won't be losing sleep over the current share price.

If you'd like to see what analysts are forecasting going forward, you should check out our free report on HL Mando.

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

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

Taking a look back first, we see that the company managed to grow revenues by a handy 2.8% last year. Pleasingly, revenue has also lifted 40% in aggregate from three years ago, partly thanks to the last 12 months of growth. So we can start by confirming that the company has done a great job of growing revenues over that time.

Turning to the outlook, the next year should generate growth of 7.2% as estimated by the analysts watching the company. Meanwhile, the rest of the industry is forecast to only expand by 4.9%, which is noticeably less attractive.

With this information, we find it interesting that HL Mando is trading at a fairly similar P/S compared to the industry. It may be that most investors aren't convinced the company can achieve future growth expectations.

The Key Takeaway

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.

Despite enticing revenue growth figures that outpace the industry, HL Mando's P/S isn't quite what we'd expect. There could be some risks that the market is pricing in, which is preventing the P/S ratio from matching the positive outlook. This uncertainty seems to be reflected in the share price which, while stable, could be higher given the revenue forecasts.

It is also worth noting that we have found 2 warning signs for HL Mando (1 is a bit unpleasant!) that you need to take into consideration.

If these risks are making you reconsider your opinion on HL Mando, explore our interactive list of high quality stocks to get an idea of what else is out there.

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

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.