It's Down 25% But OCI Holdings Company Ltd. (KRX:010060) Could Be Riskier Than It Looks

OCI Holdings Company Ltd. (KRX:010060) shareholders that were waiting for something to happen have been dealt a blow with a 25% share price drop in the last month. Instead of being rewarded, shareholders who have already held through the last twelve months are now sitting on a 35% share price drop.

Even after such a large drop in price, you could still be forgiven for feeling indifferent about OCI Holdings' P/S ratio of 0.3x, since the median price-to-sales (or "P/S") ratio for the Chemicals industry in Korea is also close to 0.7x. While this might not raise any eyebrows, if the P/S ratio is not justified investors could be missing out on a potential opportunity or ignoring looming disappointment.

Our free stock report includes 2 warning signs investors should be aware of before investing in OCI Holdings. Read for free now.

View our latest analysis for OCI Holdings

How OCI Holdings Has Been Performing

Recent times have been advantageous for OCI Holdings as its revenues have been rising faster than most other companies. Perhaps the market is expecting this level of performance to taper off, keeping the P/S from soaring. If the company manages to stay the course, then investors should be rewarded with a share price that matches its revenue figures.

Keen to find out how analysts think OCI Holdings' future stacks up against the industry? In that case, our free report is a great place to start.

How Is OCI Holdings' Revenue Growth Trending?

OCI Holdings' P/S ratio would be typical for a company that's only expected to deliver moderate growth, and importantly, perform in line with the industry.

Taking a look back first, we see that the company grew revenue by an impressive 35% last year. Revenue has also lifted 10% in aggregate from three years ago, mostly 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.

Shifting to the future, estimates from the four analysts covering the company suggest revenue should grow by 16% per year over the next three years. With the industry only predicted to deliver 11% each year, the company is positioned for a stronger revenue result.

In light of this, it's curious that OCI Holdings' P/S sits in line with the majority of other companies. It may be that most investors aren't convinced the company can achieve future growth expectations.

What We Can Learn From OCI Holdings' P/S?

OCI Holdings' plummeting stock price has brought its P/S back to a similar region as the rest of the industry. While the price-to-sales ratio shouldn't be the defining factor in whether you buy a stock or not, it's quite a capable barometer of revenue expectations.

Despite enticing revenue growth figures that outpace the industry, OCI Holdings' P/S isn't quite what we'd expect. When we see a strong revenue outlook, with growth outpacing the industry, we can only assume potential uncertainty around these figures are what might be placing slight pressure on the P/S ratio. At least the risk of a price drop looks to be subdued, but investors seem to think future revenue could see some volatility.

Don't forget that there may be other risks. For instance, we've identified 2 warning signs for OCI Holdings 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.