Vitzro Tech Co. Ltd's (KOSDAQ:042370) Shares Bounce 25% But Its Business Still Trails The Industry

Vitzro Tech Co. Ltd (KOSDAQ:042370) shares have continued their recent momentum with a 25% gain in the last month alone. Notwithstanding the latest gain, the annual share price return of 2.8% isn't as impressive.

Although its price has surged higher, given about half the companies operating in Korea's Electrical industry have price-to-sales ratios (or "P/S") above 1.3x, you may still consider Vitzro Tech as an attractive investment with its 0.6x P/S ratio. However, the P/S might be low for a reason and it requires further investigation to determine if it's justified.

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View our latest analysis for Vitzro Tech

How Has Vitzro Tech Performed Recently?

The revenue growth achieved at Vitzro Tech over the last year would be more than acceptable for most companies. It might be that many expect the respectable revenue performance to degrade substantially, which has repressed the P/S. 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 Vitzro Tech's earnings, revenue and cash flow.

Is There Any Revenue Growth Forecasted For Vitzro Tech?

There's an inherent assumption that a company should underperform the industry for P/S ratios like Vitzro Tech's to be considered reasonable.

If we review the last year of revenue growth, the company posted a terrific increase of 21%. The strong recent performance means it was also able to grow revenue by 40% in total over the last three years. Therefore, it's fair to say the revenue growth recently has been superb for the company.

This is in contrast to the rest of the industry, which is expected to grow by 15% over the next year, materially higher than the company's recent medium-term annualised growth rates.

In light of this, it's understandable that Vitzro Tech's P/S sits below the majority of other companies. It seems most investors are expecting to see the recent limited growth rates continue into the future and are only willing to pay a reduced amount for the stock.

What Does Vitzro Tech's P/S Mean For Investors?

Vitzro Tech's stock price has surged recently, but its but its P/S still remains modest. We'd say the price-to-sales ratio's power isn't primarily as a valuation instrument but rather to gauge current investor sentiment and future expectations.

In line with expectations, Vitzro Tech maintains its low P/S on the weakness of its recent three-year growth being lower than the wider industry forecast. 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.

It is also worth noting that we have found 1 warning sign for Vitzro Tech that you need to take into consideration.

If companies with solid past earnings growth is up your alley, you may wish to see this free collection of other companies with strong earnings growth and low P/E ratios.

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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.