The Price Is Right For Iljin Hysolus Co., Ltd. (KRX:271940)

When close to half the companies in the Auto Components industry in Korea have price-to-sales ratios (or "P/S") below 0.2x, you may consider Iljin Hysolus Co., Ltd. (KRX:271940) as a stock to avoid entirely with its 5.7x P/S ratio. However, the P/S might be quite high for a reason and it requires further investigation to determine if it's justified.

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.

View our latest analysis for Iljin Hysolus

What Does Iljin Hysolus' Recent Performance Look Like?

Iljin Hysolus certainly has been doing a good job lately as it's been growing revenue more than most other companies. It seems the market expects this form will continue into the future, hence the elevated P/S ratio. You'd really hope so, otherwise you're paying a pretty hefty price for no particular reason.

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

Do Revenue Forecasts Match The High P/S Ratio?

There's an inherent assumption that a company should far outperform the industry for P/S ratios like Iljin Hysolus' to be considered reasonable.

Taking a look back first, we see that the company grew revenue by an impressive 27% last year. However, this wasn't enough as the latest three year period has seen the company endure a nasty 29% drop in revenue in aggregate. Therefore, it's fair to say the revenue growth recently has been undesirable for the company.

Shifting to the future, estimates from the three analysts covering the company suggest revenue should grow by 19% per annum over the next three years. Meanwhile, the rest of the industry is forecast to only expand by 11% per year, which is noticeably less attractive.

With this in mind, it's not hard to understand why Iljin Hysolus' P/S is high relative to its industry peers. Apparently shareholders aren't keen to offload something that is potentially eyeing a more prosperous future.

What We Can Learn From Iljin Hysolus' P/S?

Typically, we'd caution against reading too much into price-to-sales ratios when settling on investment decisions, though it can reveal plenty about what other market participants think about the company.

We've established that Iljin Hysolus maintains its high P/S on the strength of its forecasted revenue growth being higher than the the rest of the Auto Components industry, as expected. Right now shareholders are comfortable with the P/S as they are quite confident future revenues aren't under threat. It's hard to see the share price falling strongly in the near future under these circumstances.

Many other vital risk factors can be found on the company's balance sheet. Our free balance sheet analysis for Iljin Hysolus with six simple checks will allow you to discover any risks that could be an issue.

If these risks are making you reconsider your opinion on Iljin Hysolus, 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.