Why Investors Shouldn't Be Surprised By Hansaemk Co.,Ltd.'s (KRX:069640) 37% Share Price Surge

The Hansaemk Co.,Ltd. (KRX:069640) share price has done very well over the last month, posting an excellent gain of 37%. Unfortunately, the gains of the last month did little to right the losses of the last year with the stock still down 20% over that time.

In spite of the firm bounce in price, you could still be forgiven for feeling indifferent about HansaemkLtd's P/S ratio of 0.2x, since the median price-to-sales (or "P/S") ratio for the Luxury industry in Korea is also close to 0.4x. However, investors might be overlooking a clear opportunity or potential setback if there is no rational basis for the P/S.

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View our latest analysis for HansaemkLtd

How HansaemkLtd Has Been Performing

For example, consider that HansaemkLtd's financial performance has been poor lately as its revenue has been in decline. It might be that many expect the company to put the disappointing revenue performance behind them over the coming period, which has kept the P/S from falling. If you like the company, you'd at least be hoping this is the case so that you could potentially pick up some stock while it's not quite in favour.

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

Is There Some Revenue Growth Forecasted For HansaemkLtd?

HansaemkLtd'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.

Retrospectively, the last year delivered a frustrating 16% decrease to the company's top line. This has soured the latest three-year period, which nevertheless managed to deliver a decent 22% overall rise in revenue. Accordingly, while they would have preferred to keep the run going, shareholders would be roughly satisfied with the medium-term rates of revenue growth.

Comparing that to the industry, which is predicted to deliver 6.0% growth in the next 12 months, the company's momentum is pretty similar based on recent medium-term annualised revenue results.

With this information, we can see why HansaemkLtd is trading at a fairly similar P/S to the industry. Apparently shareholders are comfortable to simply hold on assuming the company will continue keeping a low profile.

What Does HansaemkLtd's P/S Mean For Investors?

Its shares have lifted substantially and now HansaemkLtd's P/S is back within range of the industry median. It's argued the price-to-sales ratio is an inferior measure of value within certain industries, but it can be a powerful business sentiment indicator.

It appears to us that HansaemkLtd maintains its moderate P/S off the back of its recent three-year growth being in line with the wider industry forecast. Right now shareholders are comfortable with the P/S as they are quite confident future revenue won't throw up any surprises. Unless the recent medium-term conditions change, they will continue to support the share price at these levels.

Having said that, be aware HansaemkLtd is showing 2 warning signs in our investment analysis, you should know about.

If these risks are making you reconsider your opinion on HansaemkLtd, 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.