Optimistic Investors Push Hansol Inticube Co., Ltd. (KOSDAQ:070590) Shares Up 27% But Growth Is Lacking

Despite an already strong run, Hansol Inticube Co., Ltd. (KOSDAQ:070590) shares have been powering on, with a gain of 27% in the last thirty days. Unfortunately, the gains of the last month did little to right the losses of the last year with the stock still down 23% over that time.

Even after such a large jump in price, there still wouldn't be many who think Hansol Inticube's price-to-sales (or "P/S") ratio of 0.4x is worth a mention when the median P/S in Korea's IT industry is similar at about 0.8x. While this might not raise any eyebrows, if the P/S ratio is not justified investors could be missing out on a potential opportunity or ignoring looming disappointment.

View our latest analysis for Hansol Inticube

How Hansol Inticube Has Been Performing

The revenue growth achieved at Hansol Inticube over the last year would be more than acceptable for most companies. One possibility is that the P/S is moderate because investors think this respectable revenue growth might not be enough to outperform the broader industry in the near future. Those who are bullish on Hansol Inticube will be hoping that this isn't the case, so that they can pick up the stock at a lower valuation.

We don't have analyst forecasts, but you can see how recent trends are setting up the company for the future by checking out our free report on Hansol Inticube's earnings, revenue and cash flow.

How Is Hansol Inticube's Revenue Growth Trending?

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

If we review the last year of revenue growth, the company posted a terrific increase of 17%. Despite this strong recent growth, it's still struggling to catch up as its three-year revenue frustratingly shrank by 18% overall. So unfortunately, we have to acknowledge that the company has not done a great job of growing revenues over that time.

Weighing that medium-term revenue trajectory against the broader industry's one-year forecast for expansion of 3.5% shows it's an unpleasant look.

With this information, we find it concerning that Hansol Inticube is trading at a fairly similar P/S compared to the industry. Apparently many investors in the company are way less bearish than recent times would indicate and aren't willing to let go of their stock right now. There's a 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 We Can Learn From Hansol Inticube's P/S?

Hansol Inticube's stock has a lot of momentum behind it lately, which has brought its P/S level with the rest of the industry. 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.

The fact that Hansol Inticube currently trades at a P/S on par with the rest of the industry is surprising to us since its recent revenues have been in decline over the medium-term, all while the industry is set to grow. Even though it matches the industry, we're uncomfortable with the current P/S ratio, as this dismal revenue performance is unlikely to support a more positive sentiment for long. 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.

And what about other risks? Every company has them, and we've spotted 3 warning signs for Hansol Inticube (of which 2 don't sit too well with us!) you should know about.

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