Optimistic Investors Push Haitai Confectionery&Foods Co.,ltd. (KRX:101530) Shares Up 45% But Growth Is Lacking

Haitai Confectionery&Foods Co.,ltd. (KRX:101530) shareholders have had their patience rewarded with a 45% share price jump in the last month. Looking back a bit further, it's encouraging to see the stock is up 29% in the last year.

Even after such a large jump in price, there still wouldn't be many who think Haitai Confectionery&Foodsltd's price-to-sales (or "P/S") ratio of 0.3x is worth a mention when it essentially matches the median P/S in Korea's Food industry. Although, it's not wise to simply ignore the P/S without explanation as investors may be disregarding a distinct opportunity or a costly mistake.

Check out our latest analysis for Haitai Confectionery&Foodsltd

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

The recent revenue growth at Haitai Confectionery&Foodsltd would have to be considered satisfactory if not spectacular. One possibility is that the P/S is moderate because investors think this good revenue growth might only be parallel to the broader industry in the near future. If not, then at least existing shareholders probably aren't too pessimistic about the future direction of the share price.

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

Do Revenue Forecasts Match The P/S Ratio?

In order to justify its P/S ratio, Haitai Confectionery&Foodsltd would need to produce growth that's similar to the industry.

If we review the last year of revenue growth, the company posted a worthy increase of 5.8%. The solid recent performance means it was also able to grow revenue by 11% in total over the last three years. So we can start by confirming that the company has actually done a good job of growing revenue over that time.

This is in contrast to the rest of the industry, which is expected to grow by 8.9% over the next year, materially higher than the company's recent medium-term annualised growth rates.

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.

The Bottom Line On Haitai Confectionery&Foodsltd's P/S

Its shares have lifted substantially and now Haitai Confectionery&Foodsltd's P/S is back within range of the industry median. 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. Right now we are uncomfortable with the P/S as this revenue performance isn't likely to support a more positive sentiment for long. If recent medium-term revenue trends continue, the probability of a share price decline will become quite substantial, placing shareholders at risk.

We don't want to rain on the parade too much, but we did also find 3 warning signs for Haitai Confectionery&Foodsltd that you need to be mindful of.

If strong companies turning a profit tickle your fancy, then you'll want to check out this free list of interesting companies that trade on a low P/E (but have proven they can grow earnings).

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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.