Revenues Working Against Suheung Co., Ltd.'s (KRX:008490) Share Price

With a price-to-sales (or "P/S") ratio of 0.3x Suheung Co., Ltd. (KRX:008490) may be sending very bullish signals at the moment, given that almost half of all the Medical Equipment companies in Korea have P/S ratios greater than 2.3x and even P/S higher than 6x are not unusual. However, the P/S might be quite low for a reason and it requires further investigation to determine if it's justified.

See our latest analysis for Suheung

How Has Suheung Performed Recently?

Suheung certainly has been doing a good job lately as its revenue growth has been positive while most other companies have been seeing their revenue go backwards. Perhaps the market is expecting future revenue performance to follow the rest of the industry downwards, which has kept the P/S suppressed. Those who are bullish on Suheung will be hoping that this isn't the case and the company continues to beat out the industry.

If you'd like to see what analysts are forecasting going forward, you should check out our free report on Suheung.

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

Suheung's P/S ratio would be typical for a company that's expected to deliver very poor growth or even falling revenue, and importantly, perform much worse than the industry.

If we review the last year of revenue growth, the company posted a worthy increase of 2.5%. Revenue has also lifted 6.6% in aggregate from three years ago, partly thanks to the last 12 months of growth. So we can start by confirming that the company has actually done a good job of growing revenue over that time.

Turning to the outlook, the next three years should generate growth of 7.0% per year as estimated by the sole analyst watching the company. That's shaping up to be materially lower than the 54% each year growth forecast for the broader industry.

With this information, we can see why Suheung is trading at a P/S lower than the industry. It seems most investors are expecting to see limited future growth and are only willing to pay a reduced amount for the stock.

What We Can Learn From Suheung's P/S?

Using the price-to-sales ratio alone to determine if you should sell your stock isn't sensible, however it can be a practical guide to the company's future prospects.

As expected, our analysis of Suheung's analyst forecasts confirms that the company's underwhelming revenue outlook is a major contributor to its low P/S. At this stage investors feel the potential for an improvement in revenue isn't great enough to justify a higher P/S ratio. Unless these conditions improve, they will continue to form a barrier for the share price around these levels.

And what about other risks? Every company has them, and we've spotted 2 warning signs for Suheung (of which 1 is significant!) you should know about.

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