The Market Doesn't Like What It Sees From Haesung Optics Co., Ltd.'s (KOSDAQ:076610) Revenues Yet As Shares Tumble 26%

Haesung Optics Co., Ltd. (KOSDAQ:076610) shares have had a horrible month, losing 26% after a relatively good period beforehand. Instead of being rewarded, shareholders who have already held through the last twelve months are now sitting on a 41% share price drop.

Following the heavy fall in price, given about half the companies operating in Korea's Electronic industry have price-to-sales ratios (or "P/S") above 0.7x, you may consider Haesung Optics as an attractive investment with its 0.2x 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.

View our latest analysis for Haesung Optics

What Does Haesung Optics' P/S Mean For Shareholders?

For example, consider that Haesung Optics' financial performance has been poor lately as its revenue has been in decline. One possibility is that the P/S is low because investors think the company won't do enough to avoid underperforming the broader industry in the near future. However, if this doesn't eventuate then existing shareholders may be feeling 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 Haesung Optics will help you shine a light on its historical performance.

Do Revenue Forecasts Match The Low P/S Ratio?

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

In reviewing the last year of financials, we were disheartened to see the company's revenues fell to the tune of 5.0%. As a result, revenue from three years ago have also fallen 10% overall. So unfortunately, we have to acknowledge that the company has not done a great job of growing revenue over that time.

Weighing that medium-term revenue trajectory against the broader industry's one-year forecast for expansion of 7.9% shows it's an unpleasant look.

In light of this, it's understandable that Haesung Optics' P/S would sit below the majority of other companies. Nonetheless, there's no guarantee the P/S has reached a floor yet with revenue going in reverse. Even just maintaining these prices could be difficult to achieve as recent revenue trends are already weighing down the shares.

What Does Haesung Optics' P/S Mean For Investors?

Haesung Optics' P/S has taken a dip along with its share price. It's argued the price-to-sales ratio is an inferior measure of value within certain industries, but it can be a powerful business sentiment indicator.

As we suspected, our examination of Haesung Optics revealed its shrinking revenue over the medium-term is contributing to its low P/S, given the industry is set to grow. Right now shareholders are accepting the low P/S as they concede future revenue probably won't provide any pleasant surprises either. Unless the recent medium-term conditions improve, they will continue to form a barrier for the share price around these levels.

Before you settle on your opinion, we've discovered 1 warning sign for Haesung Optics that you should be aware of.

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