Daesung Industrial Co., Ltd.'s (KRX:128820) Shareholders Might Be Looking For Exit

It's not a stretch to say that Daesung Industrial Co., Ltd.'s (KRX:128820) price-to-sales (or "P/S") ratio of 0.1x right now seems quite "middle-of-the-road" for companies in the Specialty Retail industry in Korea, where the median P/S ratio is around 0.5x. 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 Daesung Industrial

How Daesung Industrial Has Been Performing

We'd have to say that with no tangible growth over the last year, Daesung Industrial's revenue has been unimpressive. Perhaps the market believes the recent run-of-the-mill revenue performance isn't enough to outperform the industry, which has kept the P/S muted. 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.

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

How Is Daesung Industrial's Revenue Growth Trending?

The only time you'd be comfortable seeing a P/S like Daesung Industrial's is when the company's growth is tracking the industry closely.

Retrospectively, the last year delivered virtually the same number to the company's top line as the year before. The longer-term trend has been no better as the company has no revenue growth to show for over the last three years either. So it seems apparent to us that the company has struggled to grow revenue meaningfully over that time.

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

With this information, we find it interesting that Daesung Industrial is trading at a fairly similar P/S compared to the industry. It seems most investors are ignoring the fairly limited recent growth rates and are willing to pay up for exposure to the stock. They may be setting themselves up for future disappointment if the P/S falls to levels more in line with recent growth rates.

What We Can Learn From Daesung Industrial's P/S?

Typically, we'd caution against reading too much into price-to-sales ratios when settling on investment decisions, though it can reveal plenty about what other market participants think about the company.

Our examination of Daesung Industrial 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 the recent medium-term conditions improve, it's hard to accept the current share price as fair value.

There are also other vital risk factors to consider before investing and we've discovered 1 warning sign for Daesung Industrial that you should be aware of.

If strong companies turning a profit tickle your fancy, then you'll want to check out this free list of interesting companies that trade on a low P/E (but have proven they can grow earnings).

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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.