HD Hyundai Energy Solutions Co.,Ltd. (KRX:322000) Held Back By Insufficient Growth Even After Shares Climb 29%

HD Hyundai Energy Solutions Co.,Ltd. (KRX:322000) shares have had a really impressive month, gaining 29% after a shaky period beforehand. Taking a wider view, although not as strong as the last month, the full year gain of 19% is also fairly reasonable.

Although its price has surged higher, given about half the companies operating in Korea's Semiconductor industry have price-to-sales ratios (or "P/S") above 1.3x, you may still consider HD Hyundai Energy SolutionsLtd as an attractive investment with its 0.8x 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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See our latest analysis for HD Hyundai Energy SolutionsLtd

How HD Hyundai Energy SolutionsLtd Has Been Performing

HD Hyundai Energy SolutionsLtd could be doing better as its revenue has been going backwards lately while most other companies have been seeing positive revenue growth. It seems that many are expecting the poor revenue performance to persist, which has repressed the P/S ratio. So while you could say the stock is cheap, investors will be looking for improvement before they see it as good value.

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Is There Any Revenue Growth Forecasted For HD Hyundai Energy SolutionsLtd?

In order to justify its P/S ratio, HD Hyundai Energy SolutionsLtd would need to produce sluggish growth that's trailing the industry.

In reviewing the last year of financials, we were disheartened to see the company's revenues fell to the tune of 23%. The last three years don't look nice either as the company has shrunk revenue by 29% in aggregate. So unfortunately, we have to acknowledge that the company has not done a great job of growing revenue over that time.

Shifting to the future, estimates from the lone analyst covering the company suggest revenue should grow by 24% over the next year. With the industry predicted to deliver 31% growth, the company is positioned for a weaker revenue result.

With this information, we can see why HD Hyundai Energy SolutionsLtd is trading at a P/S lower than the industry. It seems most investors are expecting to see limited future growth and are only willing to pay a reduced amount for the stock.

What Does HD Hyundai Energy SolutionsLtd's P/S Mean For Investors?

HD Hyundai Energy SolutionsLtd's stock price has surged recently, but its but its P/S still remains modest. Using the price-to-sales ratio alone to determine if you should sell your stock isn't sensible, however it can be a practical guide to the company's future prospects.

We've established that HD Hyundai Energy SolutionsLtd maintains its low P/S on the weakness of its forecast growth being lower than the wider industry, as expected. Right now shareholders are accepting the low P/S as they concede future revenue probably won't provide any pleasant surprises. The company will need a change of fortune to justify the P/S rising higher in the future.

It's always necessary to consider the ever-present spectre of investment risk. We've identified 1 warning sign with HD Hyundai Energy SolutionsLtd, and understanding should be part of your investment process.

It's important to make sure you look for a great company, not just the first idea you come across. So if growing profitability aligns with your idea of a great company, take a peek at this free list of interesting companies with strong recent earnings growth (and a low P/E).

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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.