Why Investors Shouldn't Be Surprised By Shinsung Delta Tech Co.,Ltd.'s (KOSDAQ:065350) 59% Share Price Surge

Despite an already strong run, Shinsung Delta Tech Co.,Ltd. (KOSDAQ:065350) shares have been powering on, with a gain of 59% in the last thirty days. The last 30 days were the cherry on top of the stock's 1,322% gain in the last year, which is nothing short of spectacular.

After such a large jump in price, when almost half of the companies in Korea's Electrical industry have price-to-sales ratios (or "P/S") below 1x, you may consider Shinsung Delta TechLtd as a stock not worth researching with its 4.2x P/S ratio. However, the P/S might be quite high for a reason and it requires further investigation to determine if it's justified.

View our latest analysis for Shinsung Delta TechLtd

How Has Shinsung Delta TechLtd Performed Recently?

Shinsung Delta TechLtd has been doing a good job lately as it's been growing revenue at a solid pace. It might be that many expect the respectable revenue performance to beat most other companies over the coming period, which has increased investors’ willingness to pay up for the stock. If not, then existing shareholders may be a little nervous about the viability of the share price.

Want the full picture on earnings, revenue and cash flow for the company? Then our free report on Shinsung Delta TechLtd will help you shine a light on its historical performance.

Is There Enough Revenue Growth Forecasted For Shinsung Delta TechLtd?

In order to justify its P/S ratio, Shinsung Delta TechLtd would need to produce outstanding growth that's well in excess of the industry.

Retrospectively, the last year delivered a decent 8.2% gain to the company's revenues. The latest three year period has also seen an excellent 84% overall rise in revenue, aided somewhat by its short-term performance. Therefore, it's fair to say the revenue growth recently has been superb for the company.

Comparing that recent medium-term revenue trajectory with the industry's one-year growth forecast of 3.0% shows it's noticeably more attractive.

With this information, we can see why Shinsung Delta TechLtd is trading at such a high P/S compared to the industry. Presumably shareholders aren't keen to offload something they believe will continue to outmanoeuvre the wider industry.

The Final Word

Shares in Shinsung Delta TechLtd have seen a strong upwards swing lately, which has really helped boost its P/S figure. Generally, our preference is to limit the use of the price-to-sales ratio to establishing what the market thinks about the overall health of a company.

We've established that Shinsung Delta TechLtd maintains its high P/S on the strength of its recent three-year growth being higher than the wider industry forecast, as expected. At this stage investors feel the potential continued revenue growth in the future is great enough to warrant an inflated P/S. Barring any significant changes to the company's ability to make money, the share price should continue to be propped up.

It is also worth noting that we have found 2 warning signs for Shinsung Delta TechLtd that you need to take into consideration.

If strong companies turning a profit tickle your fancy, then you'll want to check out this free list of interesting companies that trade on a low P/E (but have proven they can grow earnings).

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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.