CUROHOLDINGS Co., Ltd.'s (KOSDAQ:051780) Shares Bounce 31% But Its Business Still Trails The Industry

CUROHOLDINGS Co., Ltd. (KOSDAQ:051780) shareholders would be excited to see that the share price has had a great month, posting a 31% gain and recovering from prior weakness. But the last month did very little to improve the 61% share price decline over the last year.

In spite of the firm bounce in price, it would still be understandable if you think CUROHOLDINGS is a stock with good investment prospects with a price-to-sales ratios (or "P/S") of 0.4x, considering almost half the companies in Korea's Entertainment industry have P/S ratios above 2.1x. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the reduced P/S.

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View our latest analysis for CUROHOLDINGS

How CUROHOLDINGS Has Been Performing

It looks like revenue growth has deserted CUROHOLDINGS recently, which is not something to boast about. One possibility is that the P/S is low because investors think this benign revenue growth rate will likely underperform the broader industry in the near future. Those who are bullish on CUROHOLDINGS will be hoping that this isn't the case, so that they can pick up the stock at a lower valuation.

Want the full picture on earnings, revenue and cash flow for the company? Then our free report on CUROHOLDINGS will help you shine a light on its historical performance.

How Is CUROHOLDINGS' Revenue Growth Trending?

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

If we review the last year of revenue, the company posted a result that saw barely any deviation from a year ago. Likewise, not much has changed from three years ago as revenue have been stuck during that whole time. Therefore, it's fair to say that revenue growth has definitely eluded the company recently.

Weighing that medium-term revenue trajectory against the broader industry's one-year forecast for expansion of 19% shows it's an unpleasant look.

With this information, we are not surprised that CUROHOLDINGS is trading at a P/S lower than the industry. However, we think shrinking revenues are unlikely to lead to a stable P/S over the longer term, which could set up shareholders for future disappointment. There's potential for the P/S to fall to even lower levels if the company doesn't improve its top-line growth.

The Final Word

CUROHOLDINGS' stock price has surged recently, but its but its P/S still remains modest. 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 CUROHOLDINGS confirms that the company's shrinking revenue over the past medium-term is a key factor in its low price-to-sales ratio, given the industry is projected to grow. At this stage investors feel the potential for an improvement in revenue isn't great enough to justify a higher P/S ratio. Given the current circumstances, it seems unlikely that the share price will experience any significant movement in either direction in the near future if recent medium-term revenue trends persist.

Don't forget that there may be other risks. For instance, we've identified 4 warning signs for CUROHOLDINGS (3 can't be ignored) 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.