SK IE Technology Co., Ltd. (KRX:361610) Shares Slammed 27% But Getting In Cheap Might Be Difficult Regardless

To the annoyance of some shareholders, SK IE Technology Co., Ltd. (KRX:361610) shares are down a considerable 27% in the last month, which continues a horrid run for the company. Instead of being rewarded, shareholders who have already held through the last twelve months are now sitting on a 47% share price drop.

In spite of the heavy fall in price, you could still be forgiven for thinking SK IE Technology is a stock to steer clear of with a price-to-sales ratios (or "P/S") of 5.1x, considering almost half the companies in Korea's Electrical industry have P/S ratios below 1.5x. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the highly elevated P/S.

Check out our latest analysis for SK IE Technology

How Has SK IE Technology Performed Recently?

With revenue growth that's inferior to most other companies of late, SK IE Technology has been relatively sluggish. One possibility is that the P/S ratio is high because investors think this lacklustre revenue performance will improve markedly. If not, then existing shareholders may be very nervous about the viability of the share price.

Want the full picture on analyst estimates for the company? Then our free report on SK IE Technology will help you uncover what's on the horizon.

Is There Enough Revenue Growth Forecasted For SK IE Technology?

There's an inherent assumption that a company should far outperform the industry for P/S ratios like SK IE Technology's to be considered reasonable.

If we review the last year of revenue growth, the company posted a worthy increase of 11%. The latest three year period has also seen a 30% overall rise in revenue, aided somewhat by its short-term performance. Therefore, it's fair to say the revenue growth recently has been respectable for the company.

Shifting to the future, estimates from the analysts covering the company suggest revenue should grow by 27% per year over the next three years. Meanwhile, the rest of the industry is forecast to only expand by 22% per year, which is noticeably less attractive.

In light of this, it's understandable that SK IE Technology's P/S sits above the majority of other companies. Apparently shareholders aren't keen to offload something that is potentially eyeing a more prosperous future.

The Key Takeaway

SK IE Technology's shares may have suffered, but its P/S remains high. 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.

Our look into SK IE Technology shows that its P/S ratio remains high on the merit of its strong future revenues. At this stage investors feel the potential for a deterioration in revenues is quite remote, justifying the elevated P/S ratio. Unless these conditions change, they will continue to provide strong support to the share price.

Many other vital risk factors can be found on the company's balance sheet. Take a look at our free balance sheet analysis for SK IE Technology with six simple checks on some of these key factors.

If these risks are making you reconsider your opinion on SK IE Technology, explore our interactive list of high quality stocks to get an idea of what else is out there.

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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.