The Price Is Right For Satrec Initiative Co., Ltd. (KOSDAQ:099320) Even After Diving 27%

Satrec Initiative Co., Ltd. (KOSDAQ:099320) shareholders that were waiting for something to happen have been dealt a blow with a 27% share price drop in the last month. Still, a bad month hasn't completely ruined the past year with the stock gaining 35%, which is great even in a bull market.

Even after such a large drop in price, when almost half of the companies in Korea's Aerospace & Defense industry have price-to-sales ratios (or "P/S") below 1.4x, you may still consider Satrec Initiative as a stock probably not worth researching with its 3x P/S ratio. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the elevated P/S.

Check out our latest analysis for Satrec Initiative

How Has Satrec Initiative Performed Recently?

Recent times haven't been great for Satrec Initiative as its revenue has been rising slower than most other companies. Perhaps the market is expecting future revenue performance to undergo a reversal of fortunes, which has elevated the P/S ratio. If not, then existing shareholders may be very nervous about the viability of the share price.

Want the full picture on analyst estimates for the company? Then our free report on Satrec Initiative will help you uncover what's on the horizon.

Do Revenue Forecasts Match The High P/S Ratio?

In order to justify its P/S ratio, Satrec Initiative would need to produce impressive growth in excess of the industry.

Retrospectively, the last year delivered an exceptional 23% gain to the company's top line. The strong recent performance means it was also able to grow revenue by 57% in total over the last three years. Therefore, it's fair to say the revenue growth recently has been superb for the company.

Turning to the outlook, the next year should generate growth of 47% as estimated by the three analysts watching the company. With the industry only predicted to deliver 15%, the company is positioned for a stronger revenue result.

With this in mind, it's not hard to understand why Satrec Initiative's P/S is high relative to its industry peers. It seems most investors are expecting this strong future growth and are willing to pay more for the stock.

The Final Word

Satrec Initiative's P/S remain high even after its stock plunged. Using the price-to-sales ratio alone to determine if you should sell your stock isn't sensible, however it can be a practical guide to the company's future prospects.

As we suspected, our examination of Satrec Initiative'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.

There are also other vital risk factors to consider and we've discovered 3 warning signs for Satrec Initiative (2 are a bit unpleasant!) that you should be aware of before investing here.

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.