Investors Aren't Entirely Convinced By Kumho HT, Inc.'s (KRX:214330) Revenues

There wouldn't be many who think Kumho HT, Inc.'s (KRX:214330) 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 similar at about 0.2x. While this might not raise any eyebrows, if the P/S ratio is not justified investors could be missing out on a potential opportunity or ignoring looming disappointment.

We've found 21 US stocks that are forecast to pay a dividend yield of over 6% next year. See the full list for free.

Check out our latest analysis for Kumho HT

What Does Kumho HT's P/S Mean For Shareholders?

As an illustration, revenue has deteriorated at Kumho HT over the last year, which is not ideal at all. Perhaps investors believe the recent revenue performance is enough to keep in line with the industry, which is keeping the P/S from dropping off. If you like the company, you'd at least be hoping this is the case so that you could potentially pick up some stock while it's not quite in favour.

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 Kumho HT's earnings, revenue and cash flow.

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

Kumho HT's P/S ratio would be typical for a company that's only expected to deliver moderate growth, and importantly, perform in line with the industry.

In reviewing the last year of financials, we were disheartened to see the company's revenues fell to the tune of 1.5%. Still, the latest three year period has seen an excellent 78% overall rise in revenue, in spite of its unsatisfying short-term performance. Although it's been a bumpy ride, it's still fair to say the revenue growth recently has been more than adequate for the company.

When compared to the industry's one-year growth forecast of 10%, the most recent medium-term revenue trajectory is noticeably more alluring

In light of this, it's curious that Kumho HT's 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.

What Does Kumho HT'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.

To our surprise, Kumho HT 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. 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 settle on your opinion, we've discovered 2 warning signs for Kumho HT (1 can't be ignored!) that you should be aware of.

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

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.