Haitai Confectionery&Foods Co.,ltd.'s (KRX:101530) Price Is Out Of Tune With Revenues

It's not a stretch to say that Haitai Confectionery&Foods Co.,ltd.'s (KRX:101530) price-to-sales (or "P/S") ratio of 0.2x seems quite "middle-of-the-road" for Food companies in Korea, seeing as it matches the P/S ratio of the wider industry. However, investors might be overlooking a clear opportunity or potential setback if there is no rational basis for the P/S.

See our latest analysis for Haitai Confectionery&Foodsltd

How Has Haitai Confectionery&Foodsltd Performed Recently?

The recent revenue growth at Haitai Confectionery&Foodsltd would have to be considered satisfactory if not spectacular. It might be that many expect the respectable revenue performance to only match most other companies over the coming period, which has kept the P/S from rising. If not, then at least existing shareholders probably aren't too pessimistic about the future direction of the share price.

Want the full picture on earnings, revenue and cash flow for the company? Then our free report on Haitai Confectionery&Foodsltd will help you shine a light on its historical performance.

What Are Revenue Growth Metrics Telling Us About The P/S?

There's an inherent assumption that a company should be matching the industry for P/S ratios like Haitai Confectionery&Foodsltd's to be considered reasonable.

Taking a look back first, we see that the company managed to grow revenues by a handy 4.5% last year. The solid recent performance means it was also able to grow revenue by 13% in total over the last three years. Therefore, it's fair to say the revenue growth recently has been respectable for the company.

Comparing that to the industry, which is predicted to deliver 8.3% growth in the next 12 months, the company's momentum is weaker, based on recent medium-term annualised revenue results.

In light of this, it's curious that Haitai Confectionery&Foodsltd's P/S sits in line with the majority of other companies. Apparently many investors in the company are less bearish than recent times would indicate and aren't willing to let go of their stock right now. Maintaining these prices will be difficult to achieve as a continuation of recent revenue trends is likely to weigh down the shares eventually.

What Does Haitai Confectionery&Foodsltd's P/S Mean For Investors?

We'd say the price-to-sales ratio's power isn't primarily as a valuation instrument but rather to gauge current investor sentiment and future expectations.

Our examination of Haitai Confectionery&Foodsltd revealed its poor three-year revenue trends aren't resulting in a lower P/S as per our expectations, given they look worse than current industry outlook. When we see weak revenue with slower than industry growth, we suspect the share price is at risk of declining, bringing the P/S back in line with expectations. Unless the recent medium-term conditions improve, it's hard to accept the current share price as fair value.

Don't forget that there may be other risks. For instance, we've identified 1 warning sign for Haitai Confectionery&Foodsltd that you should be aware of.

It's important to make sure you look for a great company, not just the first idea you come across. So if growing profitability aligns with your idea of a great company, take a peek at this free list of interesting companies with strong recent earnings growth (and a low P/E).

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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.