Hd Hyundai Mipo Co.,Ltd.'s (KRX:010620) Shares Climb 27% But Its Business Is Yet to Catch Up

Hd Hyundai Mipo Co.,Ltd. (KRX:010620) shareholders would be excited to see that the share price has had a great month, posting a 27% gain and recovering from prior weakness. Notwithstanding the latest gain, the annual share price return of 9.8% isn't as impressive.

Even after such a large jump in price, there still wouldn't be many who think Hd Hyundai MipoLtd's price-to-sales (or "P/S") ratio of 0.8x is worth a mention when the median P/S in Korea's Machinery industry is similar at about 1x. Although, it's not wise to simply ignore the P/S without explanation as investors may be disregarding a distinct opportunity or a costly mistake.

See our latest analysis for Hd Hyundai MipoLtd

What Does Hd Hyundai MipoLtd's Recent Performance Look Like?

Hd Hyundai MipoLtd could be doing better as it's been growing revenue less than most other companies lately. One possibility is that the P/S ratio is moderate because investors think this lacklustre revenue performance will turn around. However, if this isn't the case, investors might get caught out paying too much for the stock.

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

Is There Some Revenue Growth Forecasted For Hd Hyundai MipoLtd?

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

Taking a look back first, we see that the company managed to grow revenues by a handy 8.7% last year. This was backed up an excellent period prior to see revenue up by 45% in total over the last three years. So we can start by confirming that the company has done a great job of growing revenues over that time.

Looking ahead now, revenue is anticipated to climb by 9.2% per annum during the coming three years according to the analysts following the company. With the industry predicted to deliver 23% growth per year, the company is positioned for a weaker revenue result.

With this in mind, we find it intriguing that Hd Hyundai MipoLtd's P/S is closely matching its industry peers. It seems most investors are ignoring the fairly limited growth expectations and are willing to pay up for exposure to the stock. Maintaining these prices will be difficult to achieve as this level of revenue growth is likely to weigh down the shares eventually.

What Does Hd Hyundai MipoLtd's P/S Mean For Investors?

Hd Hyundai MipoLtd appears to be back in favour with a solid price jump bringing its P/S back in line with other companies in the industry 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 that Hd Hyundai MipoLtd's revenue growth projections are relatively subdued in comparison to the wider industry, it comes as a surprise to see it trading at its current P/S ratio. When we see companies with a relatively weaker revenue outlook compared to the industry, we suspect the share price is at risk of declining, sending the moderate P/S lower. This places shareholders' investments at risk and potential investors in danger of paying an unnecessary premium.

Before you take the next step, you should know about the 1 warning sign for Hd Hyundai MipoLtd that we have uncovered.

If strong companies turning a profit tickle your fancy, then you'll want to check out this free list of interesting companies that trade on a low P/E (but have proven they can grow earnings).

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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.