Investors Appear Satisfied With Eco&Dream Co., Ltd.'s (KOSDAQ:101360) Prospects As Shares Rocket 28%

Those holding Eco&Dream Co., Ltd. (KOSDAQ:101360) shares would be relieved that the share price has rebounded 28% in the last thirty days, but it needs to keep going to repair the recent damage it has caused to investor portfolios. Notwithstanding the latest gain, the annual share price return of 4.6% isn't as impressive.

Following the firm bounce in price, when almost half of the companies in Korea's Auto Components industry have price-to-sales ratios (or "P/S") below 0.2x, you may consider Eco&Dream as a stock not worth researching with its 6.1x P/S ratio. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's so lofty.

See our latest analysis for Eco&Dream

What Does Eco&Dream's Recent Performance Look Like?

Recent times have been advantageous for Eco&Dream as its revenues have been rising faster than most other companies. It seems that many are expecting the strong revenue performance to persist, which has raised the P/S. You'd really hope so, otherwise you're paying a pretty hefty price for no particular reason.

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

Do Revenue Forecasts Match The High P/S Ratio?

There's an inherent assumption that a company should far outperform the industry for P/S ratios like Eco&Dream's to be considered reasonable.

Retrospectively, the last year delivered an exceptional 57% gain to the company's top line. As a result, it also grew revenue by 7.4% in total over the last three years. So we can start by confirming that the company has actually done a good job of growing revenue over that time.

Looking ahead now, revenue is anticipated to climb by 407% during the coming year according to the lone analyst following the company. Meanwhile, the rest of the industry is forecast to only expand by 9.8%, which is noticeably less attractive.

In light of this, it's understandable that Eco&Dream's P/S sits above the majority of other companies. Apparently shareholders aren't keen to offload something that is potentially eyeing a more prosperous future.

The Final Word

Eco&Dream's P/S has grown nicely over the last month thanks to a handy boost in the share price. 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.

As we suspected, our examination of Eco&Dream's analyst forecasts revealed that its superior revenue outlook is contributing to its high P/S. Right now shareholders are comfortable with the P/S as they are quite confident future revenues aren't under threat. Unless the analysts have really missed the mark, these strong revenue forecasts should keep the share price buoyant.

It is also worth noting that we have found 4 warning signs for Eco&Dream (3 are a bit unpleasant!) that you need to take into consideration.

If these risks are making you reconsider your opinion on Eco&Dream, 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.