More Unpleasant Surprises Could Be In Store For HANJOO ART Co.,LTD.'s (KOSDAQ:058450) Shares After Tumbling 44%

HANJOO ART Co.,LTD. (KOSDAQ:058450) shareholders that were waiting for something to happen have been dealt a blow with a 44% share price drop in the last month. The recent drop completes a disastrous twelve months for shareholders, who are sitting on a 72% loss during that time.

Even after such a large drop in price, there still wouldn't be many who think HANJOO ARTLTD's price-to-sales (or "P/S") ratio of 1x is worth a mention when the median P/S in Korea's Chemicals industry is similar at about 0.6x. 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.

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See our latest analysis for HANJOO ARTLTD

What Does HANJOO ARTLTD's P/S Mean For Shareholders?

With revenue growth that's exceedingly strong of late, HANJOO ARTLTD has been doing very well. Perhaps the market is expecting future revenue performance to taper off, which has kept the P/S from rising. If that doesn't eventuate, then existing shareholders have reason to be feeling optimistic about the future direction of the share price.

Although there are no analyst estimates available for HANJOO ARTLTD, 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 HANJOO ARTLTD?

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

Retrospectively, the last year delivered an exceptional 112% gain to the company's top line. Still, revenue has fallen 9.7% in total from three years ago, which is quite disappointing. Therefore, it's fair to say the revenue growth recently has been undesirable for the company.

Comparing that to the industry, which is predicted to deliver 11% growth in the next 12 months, the company's downward momentum based on recent medium-term revenue results is a sobering picture.

In light of this, it's somewhat alarming that HANJOO ARTLTD's P/S sits in line with the majority of other companies. Apparently many investors in the company are way less bearish than recent times would indicate and aren't willing to let go of their stock right now. Only the boldest would assume these prices are sustainable as a continuation of recent revenue trends is likely to weigh on the share price eventually.

What We Can Learn From HANJOO ARTLTD's P/S?

Following HANJOO ARTLTD's share price tumble, its P/S is just clinging on to the industry median P/S. 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.

The fact that HANJOO ARTLTD currently trades at a P/S on par with the rest of the industry is surprising to us since its recent revenues have been in decline over the medium-term, all while the industry is set to grow. When we see revenue heading backwards in the context of growing industry forecasts, it'd make sense to expect a possible share price decline on the horizon, sending the moderate P/S lower. Unless the recent medium-term conditions improve markedly, investors will have a hard time accepting the share price as fair value.

It is also worth noting that we have found 4 warning signs for HANJOO ARTLTD (1 makes us a bit uncomfortable!) that you need to take into consideration.

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