GS Holdings Corp. (KRX:078930) Stock Rockets 26% But Many Are Still Ignoring The Company

GS Holdings Corp. (KRX:078930) shareholders have had their patience rewarded with a 26% share price jump in the last month. The last 30 days bring the annual gain to a very sharp 36%.

In spite of the firm bounce in price, it's still not a stretch to say that GS Holdings' price-to-sales (or "P/S") ratio of 0.2x right now seems quite "middle-of-the-road" compared to the Industrials industry in Korea, where the median P/S ratio is around 0.5x. While this might not raise any eyebrows, if the P/S ratio is not justified investors could be missing out on a potential opportunity or ignoring looming disappointment.

Trump has pledged to "unleash" American oil and gas and these 15 US stocks have developments that are poised to benefit.

Check out our latest analysis for GS Holdings

How GS Holdings Has Been Performing

While the industry has experienced revenue growth lately, GS Holdings' revenue has gone into reverse gear, which is not great. It might be that many expect the dour revenue performance to strengthen positively, which has kept the P/S from falling. You'd really hope so, otherwise you're paying a relatively elevated price for a company with this sort of growth profile.

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

How Is GS Holdings' Revenue Growth Trending?

GS Holdings' P/S ratio would be typical for a company that's only expected to deliver moderate growth, and importantly, perform in line with the industry.

In reviewing the last year of financials, we were disheartened to see the company's revenues fell to the tune of 2.0%. This means it has also seen a slide in revenue over the longer-term as revenue is down 2.8% in total over the last three years. Therefore, it's fair to say the revenue growth recently has been undesirable for the company.

Turning to the outlook, the next year should demonstrate some strength in company's business, generating growth of 1.9% as estimated by the eight analysts watching the company. Meanwhile, the broader industry is forecast to contract by 16%, which would indicate the company is doing better than the majority of its peers.

Even though the growth is only slight, it's peculiar that GS Holdings' P/S sits in line with the majority of other companies given the industry is set for a decline. It looks like most investors aren't convinced the company can achieve positive future growth in the face of a shrinking broader industry.

The Key Takeaway

GS 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 While the price-to-sales ratio shouldn't be the defining factor in whether you buy a stock or not, it's quite a capable barometer of revenue expectations.

We've established that GS Holdings currently trades on a lower than expected P/S since its growth forecasts are potentially beating a struggling industry. We assume that investors are attributing some risk to the company's future revenues, keeping it from trading at a higher P/S. One such risk is that the company may not live up to analysts' revenue trajectories in tough industry conditions. It appears some are indeed anticipating revenue instability, because the company's current prospects should normally provide a boost to the share price.

There are also other vital risk factors to consider and we've discovered 2 warning signs for GS Holdings (1 can't be ignored!) that you should be aware of before investing here.

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.

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

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.