It's Down 36% But Yulho Co., Ltd. (KOSDAQ:072770) Could Be Riskier Than It Looks

Yulho Co., Ltd. (KOSDAQ:072770) shares have had a horrible month, losing 36% after a relatively good period beforehand. The recent drop completes a disastrous twelve months for shareholders, who are sitting on a 51% loss during that time.

Since its price has dipped substantially, when close to half the companies operating in Korea's Software industry have price-to-sales ratios (or "P/S") above 1.8x, you may consider Yulho as an enticing stock to check out with its 0.6x P/S ratio. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the reduced P/S.

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Check out our latest analysis for Yulho

How Has Yulho Performed Recently?

With revenue growth that's exceedingly strong of late, Yulho has been doing very well. It might be that many expect the strong revenue performance to degrade substantially, which has repressed the P/S ratio. Those who are bullish on Yulho 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 Yulho's earnings, revenue and cash flow.

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

Yulho'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.

If we review the last year of revenue growth, the company posted a terrific increase of 45%. The latest three year period has also seen an excellent 44% overall rise in revenue, aided by its short-term performance. So we can start by confirming that the company has done a great job of growing revenue over that time.

Weighing that recent medium-term revenue trajectory against the broader industry's one-year forecast for expansion of 12% shows it's about the same on an annualised basis.

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

The Key Takeaway

Yulho's recently weak share price has pulled its P/S back below other Software companies. 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.

Our examination of Yulho revealed its three-year revenue trends looking similar to current industry expectations hasn't given the P/S the boost we expected, given that it's lower than the wider industry P/S, When we see industry-like revenue growth but a lower than expected P/S, we assume potential risks are what might be placing downward pressure on the share price. revenue trends suggest that the risk of a price decline is low, investors appear to perceive a possibility of revenue volatility in the future.

And what about other risks? Every company has them, and we've spotted 3 warning signs for Yulho (of which 1 makes us a bit uncomfortable!) you should know about.

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