Investors Still Aren't Entirely Convinced By HancomWITH Inc.'s (KOSDAQ:054920) Revenues Despite 26% Price Jump

HancomWITH Inc. (KOSDAQ:054920) shares have had a really impressive month, gaining 26% after a shaky period beforehand. But the gains over the last month weren't enough to make shareholders whole, as the share price is still down 2.6% in the last twelve months.

Although its price has surged higher, it would still be understandable if you think HancomWITH is a stock with good investment prospects with a price-to-sales ratios (or "P/S") of 0.2x, considering almost half the companies in Korea's Software industry have P/S ratios above 1.7x. 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 HancomWITH

How Has HancomWITH Performed Recently?

Recent times have been quite advantageous for HancomWITH as its revenue has been rising very briskly. It might be that many expect the strong revenue performance to degrade substantially, which has repressed the P/S ratio. If that doesn't eventuate, then existing shareholders have reason to be quite 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 HancomWITH will help you shine a light on its historical performance.

How Is HancomWITH's Revenue Growth Trending?

HancomWITH's P/S ratio would be typical for a company that's only expected to deliver limited growth, and importantly, perform worse than the industry.

Retrospectively, the last year delivered an exceptional 62% gain to the company's top line. This great performance means it was also able to deliver immense revenue growth over the last three years. Accordingly, shareholders would have been over the moon with those medium-term rates of revenue growth.

This is in contrast to the rest of the industry, which is expected to grow by 18% over the next year, materially lower than the company's recent medium-term annualised growth rates.

In light of this, it's peculiar that HancomWITH's P/S sits below the majority of other companies. It looks like most investors are not convinced the company can maintain its recent growth rates.

The Key Takeaway

HancomWITH's stock price has surged recently, but its but its P/S still remains modest. We'd say the price-to-sales ratio's power isn't primarily as a valuation instrument but rather to gauge current investor sentiment and future expectations.

We're very surprised to see HancomWITH currently trading on a much lower than expected P/S since its recent three-year growth is higher than the wider industry forecast. When we see strong revenue with faster-than-industry growth, we assume there are some significant underlying risks to the company's ability to make money which is applying downwards pressure on the P/S ratio. At least price risks look to be very low if recent medium-term revenue trends continue, but investors seem to think future revenue could see a lot of volatility.

Before you settle on your opinion, we've discovered 3 warning signs for HancomWITH (1 doesn't sit too well with us!) that you should be aware of.

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