Revenues Tell The Story For Hyundai G.F. Holdings Co., Ltd. (KRX:005440) As Its Stock Soars 25%

Hyundai G.F. Holdings Co., Ltd. (KRX:005440) shareholders would be excited to see that the share price has had a great month, posting a 25% gain and recovering from prior weakness. But the last month did very little to improve the 60% share price decline over the last year.

Even after such a large jump in price, it's still not a stretch to say that Hyundai G.F. Holdings' price-to-sales (or "P/S") ratio of 0.2x right now seems quite "middle-of-the-road" compared to the Trade Distributors industry in Korea, seeing as it matches the P/S ratio of the wider industry. However, investors might be overlooking a clear opportunity or potential setback if there is no rational basis for the P/S.

View our latest analysis for Hyundai G.F. Holdings

How Hyundai G.F. Holdings Has Been Performing

With its revenue growth in positive territory compared to the declining revenue of most other companies, Hyundai G.F. Holdings has been doing quite well of late. One possibility is that the P/S ratio is moderate because investors think the company's revenue will be less resilient moving forward. Those who are bullish on Hyundai G.F. Holdings will be hoping that this isn't the case, so that they can pick up the stock at a slightly lower valuation.

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

What Are Revenue Growth Metrics Telling Us About The P/S?

In order to justify its P/S ratio, Hyundai G.F. Holdings would need to produce growth that's similar to the industry.

Taking a look back first, we see that the company grew revenue by an impressive 73% last year. As a result, it also grew revenue by 25% in total over the last three years. Accordingly, shareholders would have probably been satisfied with the medium-term rates of revenue growth.

Looking ahead now, revenue is anticipated to climb by 5.7% during the coming year according to the one analyst following the company. With the industry predicted to deliver 3.9% growth , the company is positioned for a comparable revenue result.

With this information, we can see why Hyundai G.F. Holdings is trading at a fairly similar P/S to the industry. It seems most investors are expecting to see average future growth and are only willing to pay a moderate amount for the stock.

The Final Word

Hyundai G.F. Holdings appears to be back in favour with a solid price jump bringing its P/S back in line with other companies in the industry 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 seen that Hyundai G.F. Holdings maintains an adequate P/S seeing as its revenue growth figures match the rest of the industry. Right now shareholders are comfortable with the P/S as they are quite confident future revenue won't throw up any surprises. Unless these conditions change, they will continue to support the share price at these levels.

It is also worth noting that we have found 3 warning signs for Hyundai G.F. Holdings (2 don't sit too well with us!) that you need to take into consideration.

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.