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Optimistic Investors Push Hotel Shilla Co.,Ltd (KRX:008770) Shares Up 29% But Growth Is Lacking

Simply Wall St · 05/22/2025 21:30

Hotel Shilla Co.,Ltd (KRX:008770) shareholders would be excited to see that the share price has had a great month, posting a 29% gain and recovering from prior weakness. Unfortunately, the gains of the last month did little to right the losses of the last year with the stock still down 14% over that time.

In spite of the firm bounce in price, you could still be forgiven for feeling indifferent about Hotel ShillaLtd's P/S ratio of 0.5x, since the median price-to-sales (or "P/S") ratio for the Specialty Retail industry in Korea is about the same. While this might not raise any eyebrows, if the P/S ratio is not justified investors could be missing out on a potential opportunity or ignoring looming disappointment.

Our free stock report includes 1 warning sign investors should be aware of before investing in Hotel ShillaLtd. Read for free now.

View our latest analysis for Hotel ShillaLtd

ps-multiple-vs-industry
KOSE:A008770 Price to Sales Ratio vs Industry May 22nd 2025

What Does Hotel ShillaLtd's P/S Mean For Shareholders?

Hotel ShillaLtd could be doing better as it's been growing revenue less than most other companies lately. It might be that many expect the uninspiring revenue performance to strengthen positively, which has kept the P/S ratio from falling. You'd really hope so, otherwise you're paying a relatively elevated price for a company with this sort of growth profile.

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

How Is Hotel ShillaLtd's Revenue Growth Trending?

Hotel ShillaLtd'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.

If we review the last year of revenue growth, the company posted a worthy increase of 11%. Still, revenue has barely risen at all in aggregate from three years ago, which is not ideal. Accordingly, shareholders probably wouldn't have been overly satisfied with the unstable medium-term growth rates.

Shifting to the future, estimates from the analysts covering the company suggest revenue should grow by 6.2% each year over the next three years. Meanwhile, the rest of the industry is forecast to expand by 15% per year, which is noticeably more attractive.

In light of this, it's curious that Hotel ShillaLtd's P/S sits in line with the majority of other companies. It seems most investors are ignoring the fairly limited growth expectations and are willing to pay up for exposure to the stock. Maintaining these prices will be difficult to achieve as this level of revenue growth is likely to weigh down the shares eventually.

What We Can Learn From Hotel ShillaLtd's P/S?

Hotel ShillaLtd's stock has a lot of momentum behind it lately, which has brought its P/S level with the rest of the industry. Typically, we'd caution against reading too much into price-to-sales ratios when settling on investment decisions, though it can reveal plenty about what other market participants think about the company.

When you consider that Hotel ShillaLtd's revenue growth estimates are fairly muted compared to the broader industry, it's easy to see why we consider it unexpected to be trading at its current P/S ratio. At present, we aren't confident in the P/S as the predicted future revenues aren't likely to support a more positive sentiment for long. Circumstances like this present a risk to current and prospective investors who may see share prices fall if the low revenue growth impacts the sentiment.

You always need to take note of risks, for example - Hotel ShillaLtd has 1 warning sign we think you should be aware of.

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.