Why Investors Shouldn't Be Surprised By Satrec Initiative Co., Ltd.'s (KOSDAQ:099320) 39% Share Price Surge

The Satrec Initiative Co., Ltd. (KOSDAQ:099320) share price has done very well over the last month, posting an excellent gain of 39%. The last 30 days bring the annual gain to a very sharp 33%.

Since its price has surged higher, given around half the companies in Korea's Aerospace & Defense industry have price-to-sales ratios (or "P/S") below 1.6x, you may consider Satrec Initiative as a stock to avoid entirely with its 4.3x P/S ratio. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the highly elevated P/S.

View our latest analysis for Satrec Initiative

How Has Satrec Initiative Performed Recently?

Recent times have been advantageous for Satrec Initiative as its revenues have been rising faster than most other companies. The P/S is probably high because investors think this strong revenue performance will continue. If not, then existing shareholders might be a little nervous about the viability of the share price.

Keen to find out how analysts think Satrec Initiative's future stacks up against the industry? In that case, our free report is a great place to start.

How Is Satrec Initiative's Revenue Growth Trending?

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

Taking a look back first, we see that the company grew revenue by an impressive 37% last year. The latest three year period has also seen an excellent 41% overall rise in revenue, aided by its short-term performance. Accordingly, shareholders would have definitely welcomed those medium-term rates of revenue growth.

Shifting to the future, estimates from the sole analyst covering the company suggest revenue should grow by 20% over the next year. Meanwhile, the rest of the industry is forecast to only expand by 15%, which is noticeably less attractive.

In light of this, it's understandable that Satrec Initiative's P/S sits above the majority of other companies. Apparently shareholders aren't keen to offload something that is potentially eyeing a more prosperous future.

What Does Satrec Initiative's P/S Mean For Investors?

Shares in Satrec Initiative have seen a strong upwards swing lately, which has really helped boost its P/S figure. It's argued the price-to-sales ratio is an inferior measure of value within certain industries, but it can be a powerful business sentiment indicator.

Our look into Satrec Initiative shows that its P/S ratio remains high on the merit of its strong future revenues. Right now shareholders are comfortable with the P/S as they are quite confident future revenues aren't under threat. Unless these conditions change, they will continue to provide strong support to the share price.

Before you settle on your opinion, we've discovered 4 warning signs for Satrec Initiative (2 shouldn't be ignored!) that you should be aware of.

If you're unsure about the strength of Satrec Initiative's business, why not explore our interactive list of stocks with solid business fundamentals for some other companies you may have missed.

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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.