Investors Interested In TS Nexgen Co., Ltd.'s (KOSDAQ:043220) Revenues

TS Nexgen Co., Ltd.'s (KOSDAQ:043220) price-to-sales (or "P/S") ratio of 3x may look like a poor investment opportunity when you consider close to half the companies in the Electrical industry in Korea have P/S ratios below 0.9x. 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.

Check out our latest analysis for TS Nexgen

How Has TS Nexgen Performed Recently?

As an illustration, revenue has deteriorated at TS Nexgen over the last year, which is not ideal at all. Perhaps the market believes the company can do enough to outperform the rest of the industry in the near future, which is keeping the P/S ratio high. If not, then existing shareholders may be quite nervous about the viability of the share price.

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 TS Nexgen's earnings, revenue and cash flow.

Is There Enough Revenue Growth Forecasted For TS Nexgen?

TS Nexgen's P/S ratio would be typical for a company that's expected to deliver very strong growth, and importantly, perform much better than the industry.

In reviewing the last year of financials, we were disheartened to see the company's revenues fell to the tune of 34%. Even so, admirably revenue has lifted 35% in aggregate from three years ago, notwithstanding the last 12 months. So we can start by confirming that the company has generally done a very good job of growing revenue over that time, even though it had some hiccups along the way.

Comparing that to the industry, which is only predicted to deliver 1.3% growth in the next 12 months, the company's momentum is stronger based on recent medium-term annualised revenue results.

With this information, we can see why TS Nexgen is trading at such a high P/S compared to the industry. It seems most investors are expecting this strong growth to continue and are willing to pay more for the stock.

What We Can Learn From TS Nexgen's P/S?

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.

As we suspected, our examination of TS Nexgen revealed its three-year revenue trends are contributing to its high P/S, given they look better than current industry expectations. Right now shareholders are comfortable with the P/S as they are quite confident revenue aren't under threat. Unless the recent medium-term conditions change, they will continue to provide strong support to the share price.

Having said that, be aware TS Nexgen is showing 4 warning signs in our investment analysis, and 2 of those are concerning.

If these risks are making you reconsider your opinion on TS Nexgen, 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.