Even With A 28% Surge, Cautious Investors Are Not Rewarding LG Display Co., Ltd.'s (KRX:034220) Performance Completely

LG Display Co., Ltd. (KRX:034220) shareholders have had their patience rewarded with a 28% share price jump in the last month. Not all shareholders will be feeling jubilant, since the share price is still down a very disappointing 14% in the last twelve months.

Even after such a large jump in price, LG Display may still be sending bullish signals at the moment with its price-to-sales (or "P/S") ratio of 0.3x, since almost half of all companies in the Electronic industry in Korea have P/S ratios greater than 0.9x and even P/S higher than 3x are not unusual. 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 LG Display

How LG Display Has Been Performing

LG Display could be doing better as its revenue has been going backwards lately while most other companies have been seeing positive revenue growth. Perhaps the P/S remains low as investors think the prospects of strong revenue growth aren't on the horizon. So while you could say the stock is cheap, investors will be looking for improvement before they see it as good value.

If you'd like to see what analysts are forecasting going forward, you should check out our free report on LG Display.

How Is LG Display's Revenue Growth Trending?

The only time you'd be truly comfortable seeing a P/S as low as LG Display's is when the company's growth is on track to lag the industry.

Taking a look back first, the company's revenue growth last year wasn't something to get excited about as it posted a disappointing decline of 8.0%. The last three years don't look nice either as the company has shrunk revenue by 16% in aggregate. Accordingly, shareholders would have felt downbeat about the medium-term rates of revenue growth.

Shifting to the future, estimates from the analysts covering the company suggest revenue should grow by 20% over the next year. That's shaping up to be materially higher than the 16% growth forecast for the broader industry.

In light of this, it's peculiar that LG Display's P/S sits below the majority of other companies. It looks like most investors are not convinced at all that the company can achieve future growth expectations.

What We Can Learn From LG Display's P/S?

Despite LG Display's share price climbing recently, its P/S still lags most other companies. 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.

LG Display's analyst forecasts revealed that its superior revenue outlook isn't contributing to its P/S anywhere near as much as we would have predicted. The reason for this depressed P/S could potentially be found in the risks the market is pricing in. At least price risks look to be very low, but investors seem to think future revenues could see a lot of volatility.

It is also worth noting that we have found 1 warning sign for LG Display that you need to take into consideration.

If strong companies turning a profit tickle your fancy, then you'll want to check out this free list of interesting companies that trade on a low P/E (but have proven they can grow earnings).

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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