YoungWoo DSP Co.,Ltd's (KOSDAQ:143540) Prospects Need A Boost To Lift Shares

When you see that almost half of the companies in the Semiconductor industry in Korea have price-to-sales ratios (or "P/S") above 1.5x, YoungWoo DSP Co.,Ltd (KOSDAQ:143540) looks to be giving off some buy signals with its 0.7x 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.

View our latest analysis for YoungWoo DSPLtd

How Has YoungWoo DSPLtd Performed Recently?

Recent times have been quite advantageous for YoungWoo DSPLtd as its revenue has been rising very briskly. Perhaps the market is expecting future revenue performance to dwindle, which has kept the P/S suppressed. Those who are bullish on YoungWoo DSPLtd will be hoping that this isn't the case, so that they can pick up the stock at a lower valuation.

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

Is There Any Revenue Growth Forecasted For YoungWoo DSPLtd?

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

If we review the last year of revenue growth, the company posted a terrific increase of 32%. However, this wasn't enough as the latest three year period has seen the company endure a nasty 58% drop in revenue in aggregate. Therefore, it's fair to say the revenue growth recently has been undesirable for the company.

In contrast to the company, the rest of the industry is expected to grow by 87% over the next year, which really puts the company's recent medium-term revenue decline into perspective.

With this in mind, we understand why YoungWoo DSPLtd'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. Even just maintaining these prices could be difficult to achieve as recent revenue trends are already weighing down the shares.

The Key Takeaway

While the price-to-sales ratio shouldn't be the defining factor in whether you buy a stock or not, it's quite a capable barometer of revenue expectations.

As we suspected, our examination of YoungWoo DSPLtd revealed its shrinking revenue over the medium-term is contributing to its low P/S, given the industry is set to grow. At this stage investors feel the potential for an improvement in revenue isn't great enough to justify a higher P/S ratio. 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.

Before you settle on your opinion, we've discovered 3 warning signs for YoungWoo DSPLtd (2 can't be ignored!) 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.