There's Reason For Concern Over Hansae Yes24 Holdings Co., Ltd's (KRX:016450) Massive 69% Price Jump

Simply Wall St · 10/14 21:11

Hansae Yes24 Holdings Co., Ltd (KRX:016450) shareholders have had their patience rewarded with a 69% share price jump in the last month. Looking back a bit further, it's encouraging to see the stock is up 64% in the last year.

Even after such a large jump in price, it's still not a stretch to say that Hansae Yes24 Holdings' price-to-sales (or "P/S") ratio of 0.1x right now seems quite "middle-of-the-road" compared to the Luxury industry in Korea, where the median P/S ratio is around 0.4x. Although, it's not wise to simply ignore the P/S without explanation as investors may be disregarding a distinct opportunity or a costly mistake.

Check out our latest analysis for Hansae Yes24 Holdings

ps-multiple-vs-industry
KOSE:A016450 Price to Sales Ratio vs Industry October 14th 2024

How Has Hansae Yes24 Holdings Performed Recently?

As an illustration, revenue has deteriorated at Hansae Yes24 Holdings over the last year, which is not ideal at all. It might be that many expect the company to put the disappointing revenue performance behind them over the coming period, which has kept the P/S from falling. If you like the company, you'd at least be hoping this is the case so that you could potentially pick up some stock while it's not quite in favour.

Although there are no analyst estimates available for Hansae Yes24 Holdings, take a look at this free data-rich visualisation to see how the company stacks up on earnings, revenue and cash flow.

Is There Some Revenue Growth Forecasted For Hansae Yes24 Holdings?

There's an inherent assumption that a company should be matching the industry for P/S ratios like Hansae Yes24 Holdings' to be considered reasonable.

Retrospectively, the last year delivered a frustrating 6.6% decrease to the company's top line. This means it has also seen a slide in revenue over the longer-term as revenue is down 3.6% in total over the last three years. Accordingly, shareholders would have felt downbeat about the medium-term rates of revenue growth.

Comparing that to the industry, which is predicted to deliver 6.6% growth in the next 12 months, the company's downward momentum based on recent medium-term revenue results is a sobering picture.

With this in mind, we find it worrying that Hansae Yes24 Holdings' P/S exceeds that of its industry peers. Apparently many investors in the company are way less bearish than recent times would indicate and aren't willing to let go of their stock right now. Only the boldest would assume these prices are sustainable as a continuation of recent revenue trends is likely to weigh on the share price eventually.

The Key Takeaway

Hansae Yes24 Holdings' stock has a lot of momentum behind it lately, which has brought its P/S level with the rest of the industry. 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 find it unexpected that Hansae Yes24 Holdings trades at a P/S ratio that is comparable to the rest of the industry, despite experiencing declining revenues during the medium-term, while the industry as a whole is expected to grow. Even though it matches the industry, we're uncomfortable with the current P/S ratio, as this dismal revenue performance is unlikely to support a more positive sentiment for long. If recent medium-term revenue trends continue, it will place shareholders' investments at risk and potential investors in danger of paying an unnecessary premium.

Having said that, be aware Hansae Yes24 Holdings is showing 3 warning signs in our investment analysis, and 2 of those are significant.

Of course, profitable companies with a history of great earnings growth are generally safer bets. So you may wish to see this free collection of other companies that have reasonable P/E ratios and have grown earnings strongly.