Insufficient Growth At HANA Micron Inc. (KOSDAQ:067310) Hampers Share Price

You may think that with a price-to-sales (or "P/S") ratio of 1.1x HANA Micron Inc. (KOSDAQ:067310) is a stock worth checking out, seeing as almost half of all the Semiconductor companies in Korea have P/S ratios greater than 2x and even P/S higher than 4x aren't out of the ordinary. However, the P/S might be low for a reason and it requires further investigation to determine if it's justified.

See our latest analysis for HANA Micron

What Does HANA Micron's P/S Mean For Shareholders?

With its revenue growth in positive territory compared to the declining revenue of most other companies, HANA Micron has been doing quite well of late. It might be that many expect the strong revenue performance to degrade substantially, possibly more than the industry, which has repressed the P/S. 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 out of favour.

If you'd like to see what analysts are forecasting going forward, you should check out our free report on HANA Micron.

How Is HANA Micron's Revenue Growth Trending?

The only time you'd be truly comfortable seeing a P/S as low as HANA Micron's is when the company's growth is on track to lag the industry.

Taking a look back first, we see that the company managed to grow revenues by a handy 8.2% last year. This was backed up an excellent period prior to see revenue up by 79% in total over the last three years. Accordingly, shareholders would have definitely welcomed those medium-term rates of revenue growth.

Turning to the outlook, the next three years should generate growth of 33% each year as estimated by the three analysts watching the company. That's shaping up to be materially lower than the 41% each year growth forecast for the broader industry.

In light of this, it's understandable that HANA Micron's P/S sits below the majority of other companies. It seems most investors are expecting to see limited future growth and are only willing to pay a reduced amount for the stock.

What We Can Learn From HANA Micron's P/S?

Generally, our preference is to limit the use of the price-to-sales ratio to establishing what the market thinks about the overall health of a company.

As expected, our analysis of HANA Micron's analyst forecasts confirms that the company's underwhelming revenue outlook is a major contributor to its low P/S. Right now shareholders are accepting the low P/S as they concede future revenue probably won't provide any pleasant surprises. It's hard to see the share price rising strongly in the near future under these circumstances.

Don't forget that there may be other risks. For instance, we've identified 2 warning signs for HANA Micron that you should be aware of.

Of course, profitable companies with a history of great earnings growth are generally safer bets. So you may wish to see this free collection of other companies that have reasonable P/E ratios and have grown earnings strongly.

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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.