Dong A Eltek Co., Ltd. (KOSDAQ:088130) Doing What It Can To Lift Shares

There wouldn't be many who think Dong A Eltek Co., Ltd.'s (KOSDAQ:088130) price-to-sales (or "P/S") ratio of 0.4x is worth a mention when the median P/S for the Electronic industry in Korea is similar at about 0.7x. However, investors might be overlooking a clear opportunity or potential setback if there is no rational basis for the P/S.

Check out our latest analysis for Dong A Eltek

What Does Dong A Eltek's Recent Performance Look Like?

While the industry has experienced revenue growth lately, Dong A Eltek's revenue has gone into reverse gear, which is not great. One possibility is that the P/S ratio is moderate because investors think this poor revenue performance will turn around. If not, then existing shareholders may be a little nervous about the viability of the share price.

Keen to find out how analysts think Dong A Eltek's future stacks up against the industry? In that case, our free report is a great place to start.

Is There Some Revenue Growth Forecasted For Dong A Eltek?

Dong A Eltek's P/S ratio would be typical for a company that's only expected to deliver moderate growth, and importantly, perform in line with the industry.

In reviewing the last year of financials, we were disheartened to see the company's revenues fell to the tune of 32%. This means it has also seen a slide in revenue over the longer-term as revenue is down 21% in total over the last three years. Therefore, it's fair to say the revenue growth recently has been undesirable for the company.

Shifting to the future, estimates from the sole analyst covering the company suggest revenue should grow by 52% over the next year. Meanwhile, the rest of the industry is forecast to only expand by 11%, which is noticeably less attractive.

With this information, we find it interesting that Dong A Eltek is trading at a fairly similar P/S compared to the industry. Apparently some shareholders are skeptical of the forecasts and have been accepting lower selling prices.

The Bottom Line On Dong A Eltek's P/S

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.

We've established that Dong A Eltek currently trades on a lower than expected P/S since its forecasted revenue growth is higher than the wider industry. Perhaps uncertainty in the revenue forecasts are what's keeping the P/S ratio consistent with the rest of the industry. It appears some are indeed anticipating revenue instability, because these conditions should normally provide a boost to the share price.

Having said that, be aware Dong A Eltek is showing 2 warning signs in our investment analysis, and 1 of those doesn't sit too well with us.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com