Hansol Technics Co., Ltd. (KRX:004710) Held Back By Insufficient Growth Even After Shares Climb 30%

Hansol Technics Co., Ltd. (KRX:004710) shareholders would be excited to see that the share price has had a great month, posting a 30% gain and recovering from prior weakness. Unfortunately, the gains of the last month did little to right the losses of the last year with the stock still down 17% over that time.

In spite of the firm bounce in price, when close to half the companies operating in Korea's Semiconductor industry have price-to-sales ratios (or "P/S") above 1.3x, you may still consider Hansol Technics as an enticing stock to check out with its 0.1x 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.

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Check out our latest analysis for Hansol Technics

What Does Hansol Technics' P/S Mean For Shareholders?

For instance, Hansol Technics' receding revenue in recent times would have to be some food for thought. One possibility is that the P/S is low because investors think the company won't do enough to avoid underperforming the broader industry in the near future. However, if this doesn't eventuate then existing shareholders may be feeling optimistic about the future direction of the share price.

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

How Is Hansol Technics' Revenue Growth Trending?

In order to justify its P/S ratio, Hansol Technics would need to produce sluggish growth that's trailing the industry.

Retrospectively, the last year delivered a frustrating 7.9% decrease to the company's top line. The last three years don't look nice either as the company has shrunk revenue by 20% in aggregate. So unfortunately, we have to acknowledge that the company has not done a great job of growing revenue over that time.

Comparing that to the industry, which is predicted to deliver 28% growth in the next 12 months, the company's downward momentum based on recent medium-term revenue results is a sobering picture.

With this in mind, we understand why Hansol Technics' 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 Key Takeaway

The latest share price surge wasn't enough to lift Hansol Technics' P/S close to the industry median. Typically, we'd caution against reading too much into price-to-sales ratios when settling on investment decisions, though it can reveal plenty about what other market participants think about the company.

It's no surprise that Hansol Technics maintains its low P/S off the back of its sliding revenue over the medium-term. At this stage investors feel the potential for an improvement in revenue isn't great enough to justify a higher P/S ratio. If recent medium-term revenue trends continue, it's hard to see the share price moving strongly in either direction in the near future under these circumstances.

You always need to take note of risks, for example - Hansol Technics has 1 warning sign we think you should be aware of.

If these risks are making you reconsider your opinion on Hansol Technics, 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.