Considering that almost half of the companies in South Korea's media industry have a price-to-sales multiple (P/S) of over 1.3x, The Asia Business Daily Co., Ltd. (KOSDAQ:127710) has a P/S ratio of 0.4x, which seems to be sending out a buy signal. However, it would be unwise to take the P/S at face value as there may be an explanation for why the P/S is limited.
Check out our latest analysis for Asia Business Daily
KOSDAQ:A127710 Price to Sales Ratio by Industry August 12, 2024
Asia Business Daily Performance
For example, Asia Business Daily's recent decline in earnings is thought-provoking. Perhaps the market believes that recent earnings performance is not enough to sustain the industry, which is leading to a decline in the P/S ratio. If you're interested in this company, you'd hope this isn't the case, so you could potentially buy shares while they're out of favor.
Want the full picture of the company's earnings, revenue and cash flow? A free report from Asia Business Daily can help shed light on how the company has performed over time.
Does Asia Business Daily have any revenue growth projections?
The only time you'd really feel comfortable seeing a P/S as low as Asia Business Daily's is if the company's growth is on track to lag behind the industry.
Looking back, the company's sales were down a disappointing 12% last year. That said, thanks to a first half of growth, revenues were up 20% in total compared to three years ago. So we can start by noting that the company has grown revenue overall over this period, even with some stumbles along the way.
Interestingly, the overall industry is similarly expected to grow at 6.4% over the next 12 months, which is roughly in line with the company's recent medium-term annual growth rate.
With this in mind, it's interesting to see that Asia Business Daily's P/S is below that of its peers, as most investors may not be convinced the company can sustain its recent growth rate.
Key Takeaways
While it's not wise to use the price-to-sales ratio alone to decide whether or not to sell a stock, it can be a practical indicator of a company's future prospects.
Asia Business Daily's research reveals that the company's three-year earnings trend is similar to current industry expectations, but the P/S is lower than the industry's overall P/S, which has prevented the expected P/S increase. With earnings growth in line with the industry but a lower-than-expected P/S, it is speculated that potential risks may be exerting downward pressure on the stock price. Some are anticipating earnings volatility as a continuation of recent medium-term conditions would normally provide further support to the stock price.
You should always think about the risks, as an example, Asia Business Daily has spotted 3 warning signs you should be aware of, and 1 of them can't be ignored.
If you're interested in strong companies with profitable growth, then check out this free list of interesting companies that are trading on a low P/E (but have proven they can grow earnings).
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This article by Simply Wall St is of general nature. We provide commentary based on historical data and analyst forecasts using only unbiased methodology, and our articles are not intended as financial advice. It is not a recommendation to buy or sell a stock, and does not take into account your objectives or financial situation. We aim to provide long-term analysis driven by fundamental data. Please note that our analysis may not take into account the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any of the stocks mentioned herein.
