Revenues Not Telling The Story For Duksan Hi Metal Co.,Ltd (KOSDAQ:077360) After Shares Rise 31%

Duksan Hi Metal Co.,Ltd (KOSDAQ:077360) shareholders are no doubt pleased to see that the share price has bounced 31% in the last month, although it is still struggling to make up recently lost ground. Not all shareholders will be feeling jubilant, since the share price is still down a very disappointing 43% in the last twelve months.

Although its price has surged higher, it's still not a stretch to say that Duksan Hi MetalLtd's price-to-sales (or "P/S") ratio of 0.9x right now seems quite "middle-of-the-road" compared to the Semiconductor industry in Korea, where the median P/S ratio is around 1.2x. Although, it's not wise to simply ignore the P/S without explanation as investors may be disregarding a distinct opportunity or a costly mistake.

See our latest analysis for Duksan Hi MetalLtd

What Does Duksan Hi MetalLtd's P/S Mean For Shareholders?

With revenue growth that's inferior to most other companies of late, Duksan Hi MetalLtd has been relatively sluggish. Perhaps the market is expecting future revenue performance to lift, which has kept the P/S from declining. If not, then existing shareholders may be a little nervous about the viability of the share price.

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

How Is Duksan Hi MetalLtd's Revenue Growth Trending?

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

Retrospectively, the last year delivered an exceptional 35% gain to the company's top line. The strong recent performance means it was also able to grow revenue by 174% in total over the last three years. Accordingly, shareholders would have definitely welcomed those medium-term rates of revenue growth.

Looking ahead now, revenue is anticipated to climb by 20% during the coming year according to the only analyst following the company. With the industry predicted to deliver 44% growth, the company is positioned for a weaker revenue result.

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

The Final Word

Duksan Hi MetalLtd appears to be back in favour with a solid price jump bringing its P/S back in line with other companies in the industry 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.

Our look at the analysts forecasts of Duksan Hi MetalLtd's revenue prospects has shown that its inferior revenue outlook isn't negatively impacting its P/S as much as we would have predicted. At present, we aren't confident in the P/S as the predicted future revenues aren't likely to support a more positive sentiment for long. This places shareholders' investments at risk and potential investors in danger of paying an unnecessary premium.

There are also other vital risk factors to consider and we've discovered 2 warning signs for Duksan Hi MetalLtd (1 is significant!) that you should be aware of before investing here.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.