Taihan Cable & Solution Co., Ltd.'s (KRX:001440) Price Is Out Of Tune With Revenues

It's not a stretch to say that Taihan Cable & Solution Co., Ltd.'s (KRX:001440) price-to-sales (or "P/S") ratio of 1.3x right now seems quite "middle-of-the-road" for companies in the Electrical industry in Korea, where the median P/S ratio is around 1.6x. 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.

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Check out our latest analysis for Taihan Cable & Solution

What Does Taihan Cable & Solution's P/S Mean For Shareholders?

With its revenue growth in positive territory compared to the declining revenue of most other companies, Taihan Cable & Solution has been doing quite well of late. Perhaps the market is expecting its current strong performance to taper off in accordance to the rest of the industry, which has kept the P/S contained. If not, then existing shareholders have reason to be feeling optimistic about the future direction of the share price.

Keen to find out how analysts think Taihan Cable & Solution's future stacks up against the industry? In that case, our free report is a great place to start.

Is There Some Revenue Growth Forecasted For Taihan Cable & Solution?

The only time you'd be comfortable seeing a P/S like Taihan Cable & Solution's is when the company's growth is tracking the industry closely.

Retrospectively, the last year delivered a decent 7.7% gain to the company's revenues. The latest three year period has also seen an excellent 43% overall rise in revenue, aided somewhat by its short-term performance. So we can start by confirming that the company has done a great job of growing revenues over that time.

Looking ahead now, revenue is anticipated to climb by 8.3% each year during the coming three years according to the six analysts following the company. With the industry predicted to deliver 20% growth per annum, the company is positioned for a weaker revenue result.

With this information, we find it interesting that Taihan Cable & Solution is trading at a fairly similar P/S compared to the industry. Apparently many investors in the company are less bearish than analysts indicate and aren't willing to let go of their stock right now. 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 Taihan Cable & Solution's P/S?

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.

When you consider that Taihan Cable & Solution'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. When we see companies with a relatively weaker revenue outlook compared to the industry, we suspect the share price is at risk of declining, sending the moderate P/S lower. A positive change is needed in order to justify the current price-to-sales ratio.

Plus, you should also learn about these 3 warning signs we've spotted with Taihan Cable & Solution (including 1 which shouldn't be ignored).

If you're unsure about the strength of Taihan Cable & Solution'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.