Revenues Tell The Story For Ecopro Co., Ltd. (KOSDAQ:086520) As Its Stock Soars 47%

The Ecopro Co., Ltd. (KOSDAQ:086520) share price has done very well over the last month, posting an excellent gain of 47%. The bad news is that even after the stocks recovery in the last 30 days, shareholders are still underwater by about 6.7% over the last year.

After such a large jump in price, you could be forgiven for thinking Ecopro is a stock not worth researching with a price-to-sales ratios (or "P/S") of 3.3x, considering almost half the companies in Korea's Electrical industry have P/S ratios below 1.5x. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's as high as it is.

Trump has pledged to "unleash" American oil and gas and these 15 US stocks have developments that are poised to benefit.

Check out our latest analysis for Ecopro

How Has Ecopro Performed Recently?

Ecopro has been struggling lately as its revenue has declined faster than most other companies. One possibility is that the P/S ratio is high because investors think the company will turn things around completely and accelerate past most others in the industry. However, if this isn't the case, investors might get caught out paying too much for the stock.

If you'd like to see what analysts are forecasting going forward, you should check out our free report on Ecopro.

Is There Enough Revenue Growth Forecasted For Ecopro?

Ecopro's P/S ratio would be typical for a company that's expected to deliver solid growth, and importantly, perform better than the industry.

Taking a look back first, the company's revenue growth last year wasn't something to get excited about as it posted a disappointing decline of 41%. Unfortunately, that's brought it right back to where it started three years ago with revenue growth being virtually non-existent overall during that time. So it appears to us that the company has had a mixed result in terms of growing revenue over that time.

Shifting to the future, estimates from the sole analyst covering the company suggest revenue should grow by 45% over the next year. With the industry only predicted to deliver 14%, the company is positioned for a stronger revenue result.

With this in mind, it's not hard to understand why Ecopro's P/S is high relative to its industry peers. Apparently shareholders aren't keen to offload something that is potentially eyeing a more prosperous future.

The Final Word

Ecopro's P/S is on the rise since its shares have risen strongly. While the price-to-sales ratio shouldn't be the defining factor in whether you buy a stock or not, it's quite a capable barometer of revenue expectations.

As we suspected, our examination of Ecopro's analyst forecasts revealed that its superior revenue outlook is contributing to its high P/S. At this stage investors feel the potential for a deterioration in revenues is quite remote, justifying the elevated P/S ratio. It's hard to see the share price falling strongly in the near future under these circumstances.

You should always think about risks. Case in point, we've spotted 2 warning signs for Ecopro you should be aware of, and 1 of them doesn't sit too well with us.

If these risks are making you reconsider your opinion on Ecopro, explore our interactive list of high quality stocks to get an idea of what else is out there.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.