Hana Technology Co., Ltd. (KOSDAQ:299030) Shares May Have Slumped 30% But Getting In Cheap Is Still Unlikely

Hana Technology Co., Ltd. (KOSDAQ:299030) shareholders that were waiting for something to happen have been dealt a blow with a 30% share price drop in the last month. The recent drop completes a disastrous twelve months for shareholders, who are sitting on a 69% loss during that time.

In spite of the heavy fall in price, given close to half the companies operating in Korea's Machinery industry have price-to-sales ratios (or "P/S") below 0.9x, you may still consider Hana Technology as a stock to potentially avoid with its 1.7x P/S ratio. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the elevated P/S.

View our latest analysis for Hana Technology

What Does Hana Technology's Recent Performance Look Like?

Hana Technology hasn't been tracking well recently as its declining revenue compares poorly to other companies, which have seen some growth in their revenues on average. It might be that many expect the dour revenue performance to recover substantially, which has kept the P/S from collapsing. You'd really hope so, otherwise you're paying a pretty hefty price for no particular reason.

Keen to find out how analysts think Hana Technology's 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 outperform the industry for P/S ratios like Hana Technology's to be considered reasonable.

Retrospectively, the last year delivered a frustrating 18% decrease to the company's top line. Even so, admirably revenue has lifted 62% in aggregate from three years ago, notwithstanding the last 12 months. 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.

Turning to the outlook, the next year should generate growth of 31% as estimated by the one analyst watching the company. With the industry predicted to deliver 33% growth , the company is positioned for a comparable revenue result.

With this in consideration, we find it intriguing that Hana Technology's P/S is higher than its industry peers. It seems most investors are ignoring the fairly average growth expectations and are willing to pay up for exposure to the stock. These shareholders may be setting themselves up for disappointment if the P/S falls to levels more in line with the growth outlook.

What Does Hana Technology's P/S Mean For Investors?

Hana Technology's P/S remain high even after its stock plunged. 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.

Given Hana Technology's future revenue forecasts are in line with the wider industry, the fact that it trades at an elevated P/S is somewhat surprising. The fact that the revenue figures aren't setting the world alight has us doubtful that the company's elevated P/S can be sustainable for the long term. A positive change is needed in order to justify the current price-to-sales ratio.

The company's balance sheet is another key area for risk analysis. You can assess many of the main risks through our free balance sheet analysis for Hana Technology with six simple checks.

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

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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.