Cautious Investors Not Rewarding Ssangyong Information & Communications Corp.'s (KOSDAQ:010280) Performance Completely

When you see that almost half of the companies in the IT industry in Korea have price-to-sales ratios (or "P/S") above 1x, Ssangyong Information & Communications Corp. (KOSDAQ:010280) looks to be giving off some buy signals 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.

See our latest analysis for Ssangyong Information & Communications

How Ssangyong Information & Communications Has Been Performing

With revenue growth that's superior to most other companies of late, Ssangyong Information & Communications has been doing relatively well. One possibility is that the P/S ratio is low because investors think this strong revenue performance might be less impressive moving forward. If not, then existing shareholders have reason to be quite optimistic about the future direction of the share price.

Keen to find out how analysts think Ssangyong Information & Communications' future stacks up against the industry? In that case, our free report is a great place to start.

What Are Revenue Growth Metrics Telling Us About The Low P/S?

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

Retrospectively, the last year delivered an exceptional 64% gain to the company's top line. Pleasingly, revenue has also lifted 280% in aggregate from three years ago, thanks to the last 12 months of growth. Therefore, it's fair to say the revenue growth recently has been superb for the company.

Shifting to the future, estimates from the sole analyst covering the company suggest revenue should grow by 10% over the next year. That's shaping up to be similar to the 9.6% growth forecast for the broader industry.

With this information, we find it odd that Ssangyong Information & Communications is trading at a P/S lower than the industry. Apparently some shareholders are doubtful of the forecasts and have been accepting lower selling prices.

The Bottom Line On Ssangyong Information & Communications' P/S

Generally, our preference is to limit the use of the price-to-sales ratio to establishing what the market thinks about the overall health of a company.

We've seen that Ssangyong Information & Communications currently trades on a lower than expected P/S since its forecast growth is in line with the wider industry. When we see middle-of-the-road revenue growth like this, we assume it must be the potential risks that are what is placing pressure on the P/S ratio. However, if you agree with the analysts' forecasts, you may be able to pick up the stock at an attractive price.

It is also worth noting that we have found 2 warning signs for Ssangyong Information & Communications (1 is a bit concerning!) that you need to take into consideration.

If companies with solid past earnings growth is up your alley, you may wish to see this free collection of other companies with strong earnings growth and low P/E ratios.

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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.