The 27% price increase of Singsong Holdings Co.,Ltd. (KRX:006880) is inconsistent with earnings

Singsong Holdings Co., Ltd. (KRX:006880) Shareholders have rewarded their patience with a 27% share price rise in the past month. Looking back further, the 23% gain over the past twelve months isn’t that bad, despite the strength of the past 30 days.

Even after such a big price increase, you could still be forgiven for feeling indifferent about Singsong HoldingsLtd’s P/S ratio of 0.5x, as the average price-to-sales ratio (or “P/S”) for the food industry in Korea is also close to 0.3x. Although it is not wise to simply ignore the P/S without explanation as investors may be ignoring a clear opportunity or a costly mistake.

See our latest analysis for Singsong HoldingsLtd

How has Singsong HoldingsLtd performed recently?

Singsong HoldingsLtd has been doing a decent job lately as its revenue has been growing at a decent pace. One possibility is that the price/earnings ratio is muted as investors think this good revenue growth will only parallel the broader sector for the foreseeable future. If you like the company, you hope you don’t, so you can potentially pick up some shares while it’s not quite to your liking.

While there are no analyst estimates available for Singsong HoldingsLtd, check this out free data-rich visualization to see how the company is doing in terms of revenue, revenue and cash flow.

What do the revenue growth metrics tell us about the P/S?

The only time you’ll feel comfortable seeing a P/S like Singsong HoldingsLtd’s is when the company’s growth is closely tracking the sector.

Looking at the past year of revenue growth, the company recorded a worthy increase of 5.4%. Although the last three years have not been very good in total, as no growth has been achieved at all. Therefore, it’s fair to say that revenue growth has been inconsistent for the company lately.

Comparing that to the industry, which is expected to grow 10% over the next twelve months, the company’s downward momentum based on recent revenue performance is a sobering picture over the medium term.

With this information, we find it concerning that Singsong HoldingsLtd is trading at a fairly similar P/S compared to the industry. Apparently, many investors in the company are much less bearish than recent times would suggest, and are unwilling to let go of their shares at this time. There is a good chance that existing shareholders are preparing for future disappointment if the price-earnings ratio falls to a level more in line with the recent negative growth figures.

The last word

Singsong HoldingsLtd appears to be returning to favor with a solid price increase, bringing its P/S back in line with other companies in the sector. It has been argued that the price-to-sales ratio is an inferior measure of value within certain industries, but that may be true. a powerful indicator of business sentiment.

The fact that Singsong HoldingsLtd is currently trading at a P/S similar to the rest of the industry is surprising to us, as recent medium-term earnings have fallen while the industry is expected to grow. While consistent with the sector, we are uncomfortable with the current price-to-earnings ratio as this dismal revenue performance is unlikely to support more positive long-term sentiment. If recent medium-term earnings trends continue, shareholder investments will be at risk and potential investors will be at risk of paying an unnecessary premium.

There are also other vital risk factors to consider, and we discovered that 5 Warning Signs for Singsong HoldingsLtd (2 are a bit concerning!) What to consider before investing here.

If strong companies that make profits interest you, then you’ll definitely want to check this out free list of interesting companies that trade at a low price/earnings (but have proven that they can grow their profits).

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This article from Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts using only an unbiased methodology and our articles are not intended as financial advice. It is not a recommendation to buy or sell any stock and does not take into account your objectives or financial situation. We aim to provide you with targeted, long-term analysis based on fundamental data. Please note that our analysis may not take into account the latest price-sensitive company announcements or quality material. Simply Wall St has no positions in the stocks mentioned.