There's No Escaping Sungwoo Electronics Co., Ltd.'s (KOSDAQ:081580) Muted Revenues Despite A 30% Share Price Rise

Sungwoo Electronics Co., Ltd. (KOSDAQ:081580) shares have had a really impressive month, gaining 30% after a shaky period beforehand. The bad news is that even after the stocks recovery in the last 30 days, shareholders are still underwater by about 8.0% over the last year.

Even after such a large jump in price, when close to half the companies operating in Korea's Communications industry have price-to-sales ratios (or "P/S") above 1.1x, you may still consider Sungwoo Electronics as an enticing stock to check out with its 0.3x 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 Sungwoo Electronics

How Has Sungwoo Electronics Performed Recently?

For instance, Sungwoo Electronics' receding revenue in recent times would have to be some food for thought. Perhaps the market believes the recent revenue performance isn't good enough to keep up the industry, causing the P/S ratio to suffer. Those who are bullish on Sungwoo Electronics will be hoping that this isn't the case so that they can pick up the stock at a lower valuation.

Want the full picture on earnings, revenue and cash flow for the company? Then our free report on Sungwoo Electronics will help you shine a light on its historical performance.

How Is Sungwoo Electronics' Revenue Growth Trending?

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

Retrospectively, the last year delivered a frustrating 10% decrease to the company's top line. Even so, admirably revenue has lifted 31% in aggregate from three years ago, notwithstanding the last 12 months. Although it's been a bumpy ride, it's still fair to say the revenue growth recently has been more than adequate for the company.

Comparing that to the industry, which is predicted to deliver 36% growth in the next 12 months, the company's momentum is weaker, based on recent medium-term annualised revenue results.

With this information, we can see why Sungwoo Electronics is trading at a P/S lower than the industry. Apparently many shareholders weren't comfortable holding on to something they believe will continue to trail the wider industry.

What We Can Learn From Sungwoo Electronics' P/S?

Sungwoo Electronics' stock price has surged recently, but its but its P/S still remains modest. While the price-to-sales ratio shouldn't be the defining factor in whether you buy a stock or not, it's quite a capable barometer of revenue expectations.

Our examination of Sungwoo Electronics confirms that the company's revenue trends over the past three-year years are a key factor in its low price-to-sales ratio, as we suspected, given they fall short of current industry expectations. Right now shareholders are accepting the low P/S as they concede future revenue probably won't provide any pleasant surprises. If recent medium-term revenue trends continue, it's hard to see the share price experience a reversal of fortunes anytime soon.

We don't want to rain on the parade too much, but we did also find 1 warning sign for Sungwoo Electronics that you need to be mindful of.

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.