Some Shareholders Feeling Restless Over Creas F&C Co.,Ltd's (KOSDAQ:110790) P/S Ratio

There wouldn't be many who think Creas F&C Co.,Ltd's (KOSDAQ:110790) price-to-sales (or "P/S") ratio of 0.2x is worth a mention when the median P/S for the Luxury industry in Korea is similar at about 0.4x. 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.

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Check out our latest analysis for Creas F&CLtd

How Has Creas F&CLtd Performed Recently?

Creas F&CLtd certainly has been doing a good job lately as it's been growing revenue more than most other companies. One possibility is that the P/S ratio is moderate because investors think this strong revenue performance might be about to tail off. 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 not quite in favour.

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Do Revenue Forecasts Match The P/S Ratio?

Creas F&CLtd's 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.

If we review the last year of revenue growth, the company posted a terrific increase of 23%. The latest three year period has also seen a 8.1% overall rise in revenue, aided extensively by its short-term performance. Therefore, it's fair to say the revenue growth recently has been respectable for the company.

Turning to the outlook, the next year should bring diminished returns, with revenue decreasing 23% as estimated by the sole analyst watching the company. That's not great when the rest of the industry is expected to grow by 1.5%.

In light of this, it's somewhat alarming that Creas F&CLtd's P/S sits in line with the majority of other companies. Apparently many investors in the company reject the analyst cohort's pessimism and aren't willing to let go of their stock right now. Only the boldest would assume these prices are sustainable as these declining revenues are likely to weigh on the share price eventually.

What Does Creas F&CLtd's P/S Mean For Investors?

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.

Our check of Creas F&CLtd's analyst forecasts revealed that its outlook for shrinking revenue isn't bringing down its P/S as much as we would have predicted. When we see a gloomy outlook like this, our immediate thoughts are that the share price is at risk of declining, negatively impacting P/S. If the poor revenue outlook tells us one thing, it's that these current price levels could be unsustainable.

It's always necessary to consider the ever-present spectre of investment risk. We've identified 3 warning signs with Creas F&CLtd (at least 2 which are a bit unpleasant), and understanding these should be part of your investment process.

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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.