There's No Escaping HJ Shipbuilding & Construction Co., Ltd.'s (KRX:097230) Muted Revenues Despite A 30% Share Price Rise

Despite an already strong run, HJ Shipbuilding & Construction Co., Ltd. (KRX:097230) shares have been powering on, with a gain of 30% in the last thirty days. The last month tops off a massive increase of 129% in the last year.

Even after such a large jump in price, considering around half the companies operating in Korea's Machinery industry have price-to-sales ratios (or "P/S") above 0.9x, you may still consider HJ Shipbuilding & Construction as an solid investment opportunity with its 0.3x P/S ratio. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's limited.

See our latest analysis for HJ Shipbuilding & Construction

How Has HJ Shipbuilding & Construction Performed Recently?

HJ Shipbuilding & Construction has been doing a good job lately as it's been growing revenue at a solid pace. One possibility is that the P/S is low because investors think this respectable revenue growth might actually underperform the broader industry in the near future. If you like the company, you'd be hoping this isn't the case so that you could potentially pick up some stock while it's out of favour.

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

Is There Any Revenue Growth Forecasted For HJ Shipbuilding & Construction?

The only time you'd be truly comfortable seeing a P/S as low as HJ Shipbuilding & Construction's is when the company's growth is on track to lag the industry.

Retrospectively, the last year delivered a decent 8.9% gain to the company's revenues. Pleasingly, revenue has also lifted 36% in aggregate from three years ago, partly thanks to the last 12 months of growth. So we can start by confirming that the company has done a great job of growing revenues over that time.

Comparing the recent medium-term revenue trends against the industry's one-year growth forecast of 26% shows it's noticeably less attractive.

With this in consideration, it's easy to understand why HJ Shipbuilding & Construction's P/S falls short of the mark set by its industry peers. Apparently many shareholders weren't comfortable holding on to something they believe will continue to trail the wider industry.

The Key Takeaway

The latest share price surge wasn't enough to lift HJ Shipbuilding & Construction's P/S close to the industry median. 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.

As we suspected, our examination of HJ Shipbuilding & Construction revealed its three-year revenue trends are contributing to its low P/S, given they look worse than current industry expectations. At this stage investors feel the potential for an improvement in revenue isn't great enough to justify a higher P/S ratio. If recent medium-term revenue trends continue, it's hard to see the share price experience a reversal of fortunes anytime soon.

Plus, you should also learn about these 3 warning signs we've spotted with HJ Shipbuilding & Construction.

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.