HYUNDAI MOVEX Co., Ltd.'s (KOSDAQ:319400) P/S Is Still On The Mark Following 29% Share Price Bounce

HYUNDAI MOVEX Co., Ltd. (KOSDAQ:319400) shareholders would be excited to see that the share price has had a great month, posting a 29% gain and recovering from prior weakness. Notwithstanding the latest gain, the annual share price return of 2.7% isn't as impressive.

Since its price has surged higher, you could be forgiven for thinking HYUNDAI MOVEX is a stock not worth researching with a price-to-sales ratios (or "P/S") of 1.4x, considering almost half the companies in Korea's Construction industry have P/S ratios below 0.2x. 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 HYUNDAI MOVEX

How HYUNDAI MOVEX Has Been Performing

HYUNDAI MOVEX certainly has been doing a great job lately as it's been growing its revenue at a really rapid pace. It seems that many are expecting the strong revenue performance to beat most other companies over the coming period, which has increased investors’ willingness to pay up for the stock. You'd really hope so, otherwise you're paying a pretty hefty price for no particular reason.

Although there are no analyst estimates available for HYUNDAI MOVEX, take a look at this free data-rich visualisation to see how the company stacks up on earnings, revenue and cash flow.

Do Revenue Forecasts Match The High P/S Ratio?

HYUNDAI MOVEX's P/S ratio would be typical for a company that's expected to deliver solid growth, and importantly, perform better than the industry.

If we review the last year of revenue growth, the company posted a terrific increase of 32%. The strong recent performance means it was also able to grow revenue by 31% in total over the last three years. So we can start by confirming that the company has done a great job of growing revenue over that time.

This is in contrast to the rest of the industry, which is expected to grow by 0.6% over the next year, materially lower than the company's recent medium-term annualised growth rates.

In light of this, it's understandable that HYUNDAI MOVEX's P/S sits above the majority of other companies. It seems most investors are expecting this strong growth to continue and are willing to pay more for the stock.

The Bottom Line On HYUNDAI MOVEX's P/S

HYUNDAI MOVEX shares have taken a big step in a northerly direction, but its P/S is elevated as a result. 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.

We've established that HYUNDAI MOVEX maintains its high P/S on the strength of its recent three-year growth being higher than the wider industry forecast, as expected. In the eyes of shareholders, the probability of a continued growth trajectory is great enough to prevent the P/S from pulling back. Barring any significant changes to the company's ability to make money, the share price should continue to be propped up.

A lot of potential risks can sit within a company's balance sheet. Take a look at our free balance sheet analysis for HYUNDAI MOVEX with six simple checks on some of these key factors.

If companies with solid past earnings growth is up your alley, you may wish to see this free collection of other companies with strong earnings growth and low P/E ratios.

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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.