Market Cool On Hansung Cleantech Co., Ltd.'s (KOSDAQ:066980) Revenues Pushing Shares 25% Lower

The Hansung Cleantech Co., Ltd. (KOSDAQ:066980) share price has fared very poorly over the last month, falling by a substantial 25%. For any long-term shareholders, the last month ends a year to forget by locking in a 65% share price decline.

Since its price has dipped substantially, considering around half the companies operating in Korea's Semiconductor industry have price-to-sales ratios (or "P/S") above 1.3x, you may consider Hansung Cleantech as an solid investment opportunity with its 0.3x P/S ratio. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's limited.

See our latest analysis for Hansung Cleantech

What Does Hansung Cleantech's Recent Performance Look Like?

As an illustration, revenue has deteriorated at Hansung Cleantech over the last year, which is not ideal at all. One possibility is that the P/S is low because investors think the company won't do enough to avoid underperforming the broader industry in the near future. Those who are bullish on Hansung Cleantech will be hoping that this isn't the case so that they can pick up the stock at a lower valuation.

We don't have analyst forecasts, but you can see how recent trends are setting up the company for the future by checking out our free report on Hansung Cleantech's earnings, revenue and cash flow.

Do Revenue Forecasts Match The Low P/S Ratio?

There's an inherent assumption that a company should underperform the industry for P/S ratios like Hansung Cleantech's to be considered reasonable.

Retrospectively, the last year delivered a frustrating 39% decrease to the company's top line. Even so, admirably revenue has lifted 136% in aggregate from three years ago, notwithstanding the last 12 months. Although it's been a bumpy ride, it's still fair to say the revenue growth recently has been more than adequate for the company.

Comparing that to the industry, which is predicted to deliver 31% growth in the next 12 months, the company's momentum is pretty similar based on recent medium-term annualised revenue results.

In light of this, it's peculiar that Hansung Cleantech's P/S sits below the majority of other companies. It may be that most investors are not convinced the company can maintain recent growth rates.

The Key Takeaway

Hansung Cleantech's recently weak share price has pulled its P/S back below other Semiconductor companies. 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.

The fact that Hansung Cleantech currently trades at a low P/S relative to the industry is unexpected considering its recent three-year growth is in line with the wider industry forecast. When we see industry-like revenue growth but a lower than expected P/S, we assume potential risks are what might be placing downward pressure on the share price. While recent

Before you settle on your opinion, we've discovered 3 warning signs for Hansung Cleantech (2 can't be ignored!) that you should be aware of.

If companies with solid past earnings growth is up your alley, you may wish to see this free collection of other companies with strong earnings growth and low P/E ratios.

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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.