SAMRYOONG Co.,Ltd (KOSDAQ:014970) Shares May Have Slumped 26% But Getting In Cheap Is Still Unlikely

SAMRYOONG Co.,Ltd (KOSDAQ:014970) shares have retraced a considerable 26% in the last month, reversing a fair amount of their solid recent performance. Still, a bad month hasn't completely ruined the past year with the stock gaining 36%, which is great even in a bull market.

Although its price has dipped substantially, there still wouldn't be many who think SAMRYOONGLtd's price-to-sales (or "P/S") ratio of 0.9x is worth a mention when the median P/S in Korea's Packaging industry is similar at about 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 SAMRYOONGLtd

What Does SAMRYOONGLtd's Recent Performance Look Like?

The recent revenue growth at SAMRYOONGLtd would have to be considered satisfactory if not spectacular. Perhaps the expectation moving forward is that the revenue growth will track in line with the wider industry for the near term, which has kept the P/S subdued. 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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What Are Revenue Growth Metrics Telling Us About The P/S?

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

Taking a look back first, we see that the company managed to grow revenues by a handy 4.8% last year. Revenue has also lifted 6.2% in aggregate from three years ago, partly thanks to the last 12 months of growth. Accordingly, shareholders would have probably been satisfied with the medium-term rates of revenue growth.

This is in contrast to the rest of the industry, which is expected to grow by 23% over the next year, materially higher than the company's recent medium-term annualised growth rates.

With this in mind, we find it intriguing that SAMRYOONGLtd's P/S is comparable to that of its industry peers. 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. They may be setting themselves up for future disappointment if the P/S falls to levels more in line with recent growth rates.

The Bottom Line On SAMRYOONGLtd's P/S

With its share price dropping off a cliff, the P/S for SAMRYOONGLtd looks to be in line with the rest of the Packaging industry. 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.

Our examination of SAMRYOONGLtd 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 there is a significant improvement in the company's medium-term performance, it will be difficult to prevent the P/S ratio from declining to a more reasonable level.

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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.