What You Can Learn From CS BEARING Co., Ltd.'s (KOSDAQ:297090) P/S

CS BEARING Co., Ltd.'s (KOSDAQ:297090) price-to-sales (or "P/S") ratio of 2.6x may not look like an appealing investment opportunity when you consider close to half the companies in the Machinery industry in Korea have P/S ratios below 1x. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's as high as it is.

See our latest analysis for CS BEARING

How Has CS BEARING Performed Recently?

Recent times haven't been great for CS BEARING as its revenue has been rising slower than most other companies. It might be that many expect the uninspiring revenue performance to recover significantly, which has kept the P/S ratio from collapsing. If not, then existing shareholders may be very nervous about the viability of the share price.

Want the full picture on analyst estimates for the company? Then our free report on CS BEARING will help you uncover what's on the horizon.

Is There Enough Revenue Growth Forecasted For CS BEARING?

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

Taking a look back first, we see that the company managed to grow revenues by a handy 14% last year. Ultimately though, it couldn't turn around the poor performance of the prior period, with revenue shrinking 37% in total over the last three years. Accordingly, shareholders would have felt downbeat about the medium-term rates of revenue growth.

Turning to the outlook, the next year should generate growth of 81% as estimated by the four analysts watching the company. With the industry only predicted to deliver 33%, the company is positioned for a stronger revenue result.

In light of this, it's understandable that CS BEARING's P/S sits above the majority of other companies. Apparently shareholders aren't keen to offload something that is potentially eyeing a more prosperous future.

The Key Takeaway

It's argued the price-to-sales ratio is an inferior measure of value within certain industries, but it can be a powerful business sentiment indicator.

As we suspected, our examination of CS BEARING's analyst forecasts revealed that its superior revenue outlook is contributing to its high P/S. At this stage investors feel the potential for a deterioration in revenues is quite remote, justifying the elevated P/S ratio. It's hard to see the share price falling strongly in the near future under these circumstances.

The company's balance sheet is another key area for risk analysis. Take a look at our free balance sheet analysis for CS BEARING with six simple checks on some of these key factors.

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

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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.

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