HB Technology CO.,LTD.'s (KOSDAQ:078150) Prospects Need A Boost To Lift Shares

You may think that with a price-to-sales (or "P/S") ratio of 1.3x HB Technology CO.,LTD. (KOSDAQ:078150) is a stock worth checking out, seeing as almost half of all the Semiconductor companies in Korea have P/S ratios greater than 1.9x 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.

Check out our latest analysis for HB TechnologyLTD

How Has HB TechnologyLTD Performed Recently?

It looks like revenue growth has deserted HB TechnologyLTD 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. If not, then existing shareholders may be feeling optimistic about the future direction of the share price.

Although there are no analyst estimates available for HB TechnologyLTD, take a look at this free data-rich visualisation to see how the company stacks up on earnings, revenue and cash flow.

Is There Any Revenue Growth Forecasted For HB TechnologyLTD?

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

Retrospectively, the last year delivered virtually the same number to the company's top line as the year before. The lack of growth did nothing to help the company's aggregate three-year performance, which is an unsavory 44% drop in revenue. Accordingly, shareholders would have felt downbeat about the medium-term rates of revenue growth.

Weighing that medium-term revenue trajectory against the broader industry's one-year forecast for expansion of 69% shows it's an unpleasant look.

With this in mind, we understand why HB TechnologyLTD's P/S is lower than most of its industry peers. Nonetheless, there's no guarantee the P/S has reached a floor yet with revenue going in reverse. There's potential for the P/S to fall to even lower levels if the company doesn't improve its top-line growth.

The Bottom Line On HB TechnologyLTD's P/S

It's argued the price-to-sales ratio is an inferior measure of value within certain industries, but it can be a powerful business sentiment indicator.

As we suspected, our examination of HB TechnologyLTD revealed its shrinking revenue over the medium-term is contributing to its low P/S, given the industry is set to grow. Right now shareholders are accepting the low P/S as they concede future revenue probably won't provide any pleasant surprises either. 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.

Plus, you should also learn about this 1 warning sign we've spotted with HB TechnologyLTD.

If these risks are making you reconsider your opinion on HB TechnologyLTD, explore our interactive list of high quality stocks to get an idea of what else is out there.

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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.