Hyosung Heavy Industries Corporation (KRX:298040) Stock Rockets 34% But Many Are Still Ignoring The Company

Hyosung Heavy Industries Corporation (KRX:298040) shares have continued their recent momentum with a 34% gain in the last month alone. This latest share price bounce rounds out a remarkable 421% gain over the last twelve months.

Although its price has surged higher, there still wouldn't be many who think Hyosung Heavy Industries' price-to-sales (or "P/S") ratio of 0.9x is worth a mention when the median P/S in Korea's Electrical industry is similar at about 1.3x. 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.

See our latest analysis for Hyosung Heavy Industries

What Does Hyosung Heavy Industries' P/S Mean For Shareholders?

Recent revenue growth for Hyosung Heavy Industries has been in line with the industry. The P/S ratio is probably moderate because investors think this modest revenue performance will continue. Those who are bullish on Hyosung Heavy Industries will be hoping that revenue performance can pick up, so that they can pick up the stock at a slightly lower valuation.

Keen to find out how analysts think Hyosung Heavy Industries' 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, Hyosung Heavy Industries would need to produce growth that's similar to the industry.

Retrospectively, the last year delivered an exceptional 18% gain to the company's top line. Pleasingly, revenue has also lifted 52% in aggregate from three years ago, thanks to the last 12 months of growth. Therefore, it's fair to say the revenue growth recently has been superb for the company.

Shifting to the future, estimates from the six analysts covering the company suggest revenue should grow by 12% over the next year. Meanwhile, the rest of the industry is forecast to only expand by 0.6%, which is noticeably less attractive.

With this information, we find it interesting that Hyosung Heavy Industries is trading at a fairly similar P/S compared to the industry. Apparently some shareholders are skeptical of the forecasts and have been accepting lower selling prices.

The Final Word

Hyosung Heavy Industries 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 Hyosung Heavy Industries currently trades on a lower than expected P/S since its forecasted revenue growth is higher than the wider industry. When we see a strong revenue outlook, with growth outpacing the industry, we can only assume potential uncertainty around these figures are what might be placing slight pressure on the P/S ratio. However, if you agree with the analysts' forecasts, you may be able to pick up the stock at an attractive price.

Before you settle on your opinion, we've discovered 2 warning signs for Hyosung Heavy Industries (1 is potentially serious!) that you should be aware of.

If you're unsure about the strength of Hyosung Heavy Industries' business, why not explore our interactive list of stocks with solid business fundamentals for some other companies you may have missed.

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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.