Cellumed Co.,Ltd. (KOSDAQ:049180) Looks Inexpensive But Perhaps Not Attractive Enough
You may think that with a price-to-sales (or "P/S") ratio of 0.3x Cellumed Co.,Ltd. (KOSDAQ:049180) is a stock worth checking out, seeing as almost half of all the Medical Equipment companies in Korea have P/S ratios greater than 2.2x and even P/S higher than 8x aren't out of the ordinary. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's limited.
See our latest analysis for CellumedLtd
How Has CellumedLtd Performed Recently?
CellumedLtd has been doing a good job lately as it's been growing revenue at a solid pace. Perhaps the market is expecting this acceptable revenue performance to take a dive, which has kept the P/S suppressed. If you like the company, you'd be hoping this isn't the case so that you could potentially pick up some stock while it's out of favour.
We don't have analyst forecasts, but you can see how recent trends are setting up the company for the future by checking out our free report on CellumedLtd's earnings, revenue and cash flow.Do Revenue Forecasts Match The Low P/S Ratio?
The only time you'd be truly comfortable seeing a P/S as low as CellumedLtd's is when the company's growth is on track to lag the industry.
If we review the last year of revenue growth, the company posted a terrific increase of 24%. As a result, it also grew revenue by 18% in total over the last three years. Therefore, it's fair to say the revenue growth recently has been respectable for the company.
Comparing the recent medium-term revenue trends against the industry's one-year growth forecast of 68% shows it's noticeably less attractive.
With this information, we can see why CellumedLtd is trading at a P/S lower than the industry. Apparently many shareholders weren't comfortable holding on to something they believe will continue to trail the wider industry.
What We Can Learn From CellumedLtd'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.
Our examination of CellumedLtd confirms that the company's revenue trends over the past three-year years are a key factor in its low price-to-sales ratio, as we suspected, given they fall short of current industry expectations. At this stage investors feel the potential for an improvement in revenue isn't great enough to justify a higher P/S ratio. Unless the recent medium-term conditions improve, they will continue to form a barrier for the share price around these levels.
Before you take the next step, you should know about the 4 warning signs for CellumedLtd (2 don't sit too well with us!) that we have uncovered.
If these risks are making you reconsider your opinion on CellumedLtd, explore our interactive list of high quality stocks to get an idea of what else is out there.
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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.