Dongkuk Structures & Construction Company Limited's (KOSDAQ:100130) Shareholders Might Be Looking For Exit

There wouldn't be many who think Dongkuk Structures & Construction Company Limited's (KOSDAQ:100130) price-to-sales (or "P/S") ratio of 0.7x is worth a mention when the median P/S for the Construction industry in Korea is similar at about 0.3x. 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.

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View our latest analysis for Dongkuk Structures & Construction

How Dongkuk Structures & Construction Has Been Performing

With its revenue growth in positive territory compared to the declining revenue of most other companies, Dongkuk Structures & Construction has been doing quite well of late. It might be that many expect the strong revenue performance to deteriorate like the rest, which has kept the P/S ratio from rising. If you like the company, you'd be hoping this isn't the case so that you could potentially pick up some stock while it's not quite in favour.

If you'd like to see what analysts are forecasting going forward, you should check out our free report on Dongkuk Structures & Construction.

Is There Some Revenue Growth Forecasted For Dongkuk Structures & Construction?

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

Retrospectively, the last year delivered an exceptional 118% gain to the company's top line. Despite this strong recent growth, it's still struggling to catch up as its three-year revenue frustratingly shrank by 68% overall. So unfortunately, we have to acknowledge that the company has not done a great job of growing revenues over that time.

Looking ahead now, revenue is anticipated to slump, contracting by 14% during the coming year according to the only analyst following the company. That's not great when the rest of the industry is expected to grow by 3.9%.

In light of this, it's somewhat alarming that Dongkuk Structures & Construction's P/S sits in line with the majority of other companies. Apparently many investors in the company reject the analyst cohort's pessimism and aren't willing to let go of their stock right now. Only the boldest would assume these prices are sustainable as these declining revenues are likely to weigh on the share price eventually.

The Key Takeaway

Generally, our preference is to limit the use of the price-to-sales ratio to establishing what the market thinks about the overall health of a company.

It appears that Dongkuk Structures & Construction currently trades on a higher than expected P/S for a company whose revenues are forecast to decline. With this in mind, we don't feel the current P/S is justified as declining revenues are unlikely to support a more positive sentiment for long. If the declining revenues were to materialize in the form of a declining share price, shareholders will be feeling the pinch.

We don't want to rain on the parade too much, but we did also find 1 warning sign for Dongkuk Structures & Construction that you need to be mindful of.

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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.