EcoPro BM Co., Ltd. (KOSDAQ:247540) Looks Just Right With A 32% Price Jump

Despite an already strong run, EcoPro BM Co., Ltd. (KOSDAQ:247540) shares have been powering on, with a gain of 32% in the last thirty days. While recent buyers may be laughing, long-term holders might not be as pleased since the recent gain only brings the stock back to where it started a year ago.

Since its price has surged higher, you could be forgiven for thinking EcoPro BM is a stock to steer clear of with a price-to-sales ratios (or "P/S") of 6.6x, considering almost half the companies in Korea's Electrical industry have P/S ratios below 1.5x. However, the P/S might be quite high for a reason and it requires further investigation to determine if it's justified.

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View our latest analysis for EcoPro BM

How EcoPro BM Has Been Performing

Recent times haven't been great for EcoPro BM as its revenue has been falling quicker 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. If not, then existing shareholders may be very nervous about the viability of the share price.

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

How Is EcoPro BM's Revenue Growth Trending?

There's an inherent assumption that a company should far outperform the industry for P/S ratios like EcoPro BM's to be considered reasonable.

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 50%. As a result, revenue from three years ago have also fallen 13% overall. Therefore, it's fair to say the revenue growth recently has been undesirable for the company.

Turning to the outlook, the next three years should generate growth of 52% per annum as estimated by the analysts watching the company. Meanwhile, the rest of the industry is forecast to only expand by 19% per annum, which is noticeably less attractive.

With this information, we can see why EcoPro BM is trading at such a high P/S compared to the industry. Apparently shareholders aren't keen to offload something that is potentially eyeing a more prosperous future.

The Bottom Line On EcoPro BM's P/S

Shares in EcoPro BM have seen a strong upwards swing lately, which has really helped boost its P/S figure. We'd say the price-to-sales ratio's power isn't primarily as a valuation instrument but rather to gauge current investor sentiment and future expectations.

As we suspected, our examination of EcoPro BM's analyst forecasts revealed that its superior revenue outlook is contributing to its high P/S. It appears that shareholders are confident in the company's future revenues, which is propping up the P/S. It's hard to see the share price falling strongly in the near future under these circumstances.

There are also other vital risk factors to consider and we've discovered 2 warning signs for EcoPro BM (1 is a bit concerning!) that you should be aware of before investing here.

If companies with solid past earnings growth is up your alley, you may wish to see this free collection of other companies with strong earnings growth and low P/E ratios.

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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.