Revenues Working Against MYUNGMOON Pharm co.,Ltd's (KRX:017180) Share Price
MYUNGMOON Pharm co.,Ltd's (KRX:017180) price-to-sales (or "P/S") ratio of 0.3x might make it look like a buy right now compared to the Pharmaceuticals industry in Korea, where around half of the companies have P/S ratios above 0.9x and even P/S above 3x are quite common. However, the P/S might be low for a reason and it requires further investigation to determine if it's justified.
See our latest analysis for MYUNGMOON PharmLtd
How Has MYUNGMOON PharmLtd Performed Recently?
Revenue has risen at a steady rate over the last year for MYUNGMOON PharmLtd, which is generally not a bad outcome. It might be that many expect the respectable revenue performance to degrade, which has repressed the P/S. If that doesn't eventuate, then existing shareholders may have reason to be optimistic about the future direction of the share price.
Although there are no analyst estimates available for MYUNGMOON PharmLtd, take a look at this free data-rich visualisation to see how the company stacks up on earnings, revenue and cash flow.What Are Revenue Growth Metrics Telling Us About The Low P/S?
In order to justify its P/S ratio, MYUNGMOON PharmLtd would need to produce sluggish growth that's trailing the industry.
Taking a look back first, we see that the company managed to grow revenues by a handy 7.5% last year. Pleasingly, revenue has also lifted 31% in aggregate from three years ago, partly thanks to the last 12 months of growth. Accordingly, shareholders would have definitely welcomed those medium-term rates of revenue growth.
This is in contrast to the rest of the industry, which is expected to grow by 31% over the next year, materially higher than the company's recent medium-term annualised growth rates.
With this information, we can see why MYUNGMOON PharmLtd is trading at a P/S lower than the industry. It seems most investors are expecting to see the recent limited growth rates continue into the future and are only willing to pay a reduced amount for the stock.
What Does MYUNGMOON PharmLtd's P/S Mean For Investors?
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.
In line with expectations, MYUNGMOON PharmLtd maintains its low P/S on the weakness of its recent three-year growth being lower than the wider industry forecast. At this stage investors feel the potential for an improvement in revenue isn't great enough to justify a higher P/S ratio. If recent medium-term revenue trends continue, it's hard to see the share price experience a reversal of fortunes anytime soon.
And what about other risks? Every company has them, and we've spotted 3 warning signs for MYUNGMOON PharmLtd (of which 1 is a bit concerning!) you should know about.
If you're unsure about the strength of MYUNGMOON PharmLtd's business, why not explore our interactive list of stocks with solid business fundamentals for some other companies you may have missed.
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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.