Creative & Innovative System Corporation (KOSDAQ:222080) Stock Rockets 26% As Investors Are Less Pessimistic Than Expected

Those holding Creative & Innovative System Corporation (KOSDAQ:222080) shares would be relieved that the share price has rebounded 26% in the last thirty days, but it needs to keep going to repair the recent damage it has caused to investor portfolios. Not all shareholders will be feeling jubilant, since the share price is still down a very disappointing 11% in the last twelve months.

Following the firm bounce in price, when almost half of the companies in Korea's Machinery industry have price-to-sales ratios (or "P/S") below 0.9x, you may consider Creative & Innovative System as a stock probably not worth researching with its 1.5x P/S ratio. However, the P/S might be high for a reason and it requires further investigation to determine if it's justified.

Check out our latest analysis for Creative & Innovative System

What Does Creative & Innovative System's Recent Performance Look Like?

Creative & Innovative System certainly has been doing a good job lately as it's been growing revenue more 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 Creative & Innovative System's future stacks up against the industry? In that case, our free report is a great place to start.

How Is Creative & Innovative System's Revenue Growth Trending?

The only time you'd be truly comfortable seeing a P/S as high as Creative & Innovative System's is when the company's growth is on track to outshine the industry.

If we review the last year of revenue growth, the company posted a terrific increase of 211%. Pleasingly, revenue has also lifted 209% in aggregate from three years ago, thanks to the last 12 months of growth. Therefore, it's fair to say the revenue growth recently has been superb for the company.

Shifting to the future, estimates from the one analyst covering the company suggest revenue should grow by 6.8% over the next year. With the industry predicted to deliver 38% growth, the company is positioned for a weaker revenue result.

In light of this, it's alarming that Creative & Innovative System's P/S sits above the majority of other companies. It seems most investors are hoping for a turnaround in the company's business prospects, but the analyst cohort is not so confident this will happen. There's a good chance these shareholders are setting themselves up for future disappointment if the P/S falls to levels more in line with the growth outlook.

What We Can Learn From Creative & Innovative System's P/S?

Creative & Innovative System shares have taken a big step in a northerly direction, but its P/S is elevated as a result. 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.

It comes as a surprise to see Creative & Innovative System trade at such a high P/S given the revenue forecasts look less than stellar. When we see a weak revenue outlook, we suspect the share price faces a much greater risk of declining, bringing back down the P/S figures. At these price levels, investors should remain cautious, particularly if things don't improve.

It is also worth noting that we have found 2 warning signs for Creative & Innovative System (1 doesn't sit too well with us!) that you need to take into consideration.

Of course, profitable companies with a history of great earnings growth are generally safer bets. So you may wish to see this free collection of other companies that have reasonable P/E ratios and have grown earnings strongly.

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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.