CS Wind Corporation (KRX:112610) Shares Fly 33% But Investors Aren't Buying For Growth

CS Wind Corporation (KRX:112610) shares have had a really impressive month, gaining 33% after a shaky period beforehand. Not all shareholders will be feeling jubilant, since the share price is still down a very disappointing 19% in the last twelve months.

Even after such a large jump in price, given about half the companies operating in Korea's Electrical industry have price-to-sales ratios (or "P/S") above 1.1x, you may still consider CS Wind as an attractive investment with its 0.6x P/S ratio. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the reduced P/S.

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See our latest analysis for CS Wind

How CS Wind Has Been Performing

With its revenue growth in positive territory compared to the declining revenue of most other companies, CS Wind has been doing quite well of late. It might be that many expect the strong revenue performance to degrade substantially, possibly more than the industry, which has repressed the P/S. Those who are bullish on CS Wind will be hoping that this isn't the case and the company continues to beat out the industry.

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Is There Any Revenue Growth Forecasted For CS Wind?

There's an inherent assumption that a company should underperform the industry for P/S ratios like CS Wind's to be considered reasonable.

Taking a look back first, we see that the company grew revenue by an impressive 102% last year. The strong recent performance means it was also able to grow revenue by 157% in total over the last three years. Therefore, it's fair to say the revenue growth recently has been superb for the company.

Looking ahead now, revenue is anticipated to climb by 9.6% per year during the coming three years according to the eight analysts following the company. That's shaping up to be materially lower than the 19% per year growth forecast for the broader industry.

With this in consideration, its clear as to why CS Wind's P/S is falling short industry peers. It seems most investors are expecting to see limited future growth and are only willing to pay a reduced amount for the stock.

The Final Word

The latest share price surge wasn't enough to lift CS Wind's P/S close to the industry median. Generally, our preference is to limit the use of the price-to-sales ratio to establishing what the market thinks about the overall health of a company.

As we suspected, our examination of CS Wind's analyst forecasts revealed that its inferior revenue outlook is contributing to its low P/S. At this stage investors feel the potential for an improvement in revenue isn't great enough to justify a higher P/S ratio. Unless these conditions improve, they will continue to form a barrier for the share price around these levels.

You should always think about risks. Case in point, we've spotted 2 warning signs for CS Wind you should be aware of, and 1 of them is concerning.

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.