Willings Co., Ltd. (KOSDAQ:313760) Shares May Have Slumped 28% But Getting In Cheap Is Still Unlikely

Willings Co., Ltd. (KOSDAQ:313760) shares have retraced a considerable 28% in the last month, reversing a fair amount of their solid recent performance. Looking back over the past twelve months the stock has been a solid performer regardless, with a gain of 10%.

Even after such a large drop in price, when almost half of the companies in Korea's Semiconductor industry have price-to-sales ratios (or "P/S") below 1.8x, you may still consider Willings as a stock probably not worth researching with its 3.6x P/S ratio. However, the P/S might be high for a reason and it requires further investigation to determine if it's justified.

See our latest analysis for Willings

What Does Willings' Recent Performance Look Like?

As an illustration, revenue has deteriorated at Willings over the last year, which is not ideal at all. Perhaps the market believes the company can do enough to outperform the rest of the industry in the near future, which is keeping the P/S ratio high. If not, then existing shareholders may be quite nervous about the viability of the share price.

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

Is There Enough Revenue Growth Forecasted For Willings?

The only time you'd be truly comfortable seeing a P/S as high as Willings' is when the company's growth is on track to outshine the industry.

Retrospectively, the last year delivered a frustrating 77% decrease to the company's top line. This means it has also seen a slide in revenue over the longer-term as revenue is down 78% in total over the last three years. So unfortunately, we have to acknowledge that the company has not done a great job of growing revenue over that time.

In contrast to the company, the rest of the industry is expected to grow by 65% over the next year, which really puts the company's recent medium-term revenue decline into perspective.

With this in mind, we find it worrying that Willings' P/S exceeds that of its industry peers. It seems most investors are ignoring the recent poor growth rate and are hoping for a turnaround in the company's business prospects. There's a very good chance existing shareholders are setting themselves up for future disappointment if the P/S falls to levels more in line with the recent negative growth rates.

What Does Willings' P/S Mean For Investors?

There's still some elevation in Willings' P/S, even if the same can't be said for its share price recently. 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.

We've established that Willings currently trades on a much higher than expected P/S since its recent revenues have been in decline over the medium-term. With a revenue decline on investors' minds, the likelihood of a souring sentiment is quite high which could send the P/S back in line with what we'd expect. Unless the the circumstances surrounding the recent medium-term improve, it wouldn't be wrong to expect a a difficult period ahead for the company's shareholders.

Plus, you should also learn about these 4 warning signs we've spotted with Willings (including 3 which shouldn't be ignored).

If you're unsure about the strength of Willings' business, why not explore our interactive list of stocks with solid business fundamentals for some other companies you may have missed.

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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.