Optimistic Investors Push Kencoa Aerospace Corporation (KOSDAQ:274090) Shares Up 48% But Growth Is Lacking

Kencoa Aerospace Corporation (KOSDAQ:274090) shares have continued their recent momentum with a 48% gain in the last month alone. Taking a wider view, although not as strong as the last month, the full year gain of 19% is also fairly reasonable.

Although its price has surged higher, you could still be forgiven for feeling indifferent about Kencoa Aerospace's P/S ratio of 2.1x, since the median price-to-sales (or "P/S") ratio for the Aerospace & Defense industry in Korea is also close to 1.7x. While this might not raise any eyebrows, if the P/S ratio is not justified investors could be missing out on a potential opportunity or ignoring looming disappointment.

See our latest analysis for Kencoa Aerospace

How Kencoa Aerospace Has Been Performing

Recent times haven't been great for Kencoa Aerospace as its revenue has been rising slower than most other companies. Perhaps the market is expecting future revenue performance to lift, which has kept the P/S from declining. If not, then existing shareholders may be a little nervous about the viability of the share price.

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

Is There Some Revenue Growth Forecasted For Kencoa Aerospace?

The only time you'd be comfortable seeing a P/S like Kencoa Aerospace's is when the company's growth is tracking the industry closely.

If we review the last year of revenue, the company posted a result that saw barely any deviation from a year ago. Although pleasingly revenue has lifted 93% in aggregate from three years ago, notwithstanding the last 12 months. Accordingly, shareholders will be pleased, but also have some questions to ponder about the last 12 months.

Turning to the outlook, the next year should generate growth of 39% as estimated by the one analyst watching the company. That's shaping up to be materially lower than the 133% growth forecast for the broader industry.

In light of this, it's curious that Kencoa Aerospace's P/S sits in line with the majority of other companies. Apparently many investors in the company are less bearish than analysts indicate and aren't willing to let go of their stock right now. These shareholders may be setting themselves up for future disappointment if the P/S falls to levels more in line with the growth outlook.

The Bottom Line On Kencoa Aerospace's P/S

Kencoa Aerospace appears to be back in favour with a solid price jump bringing its P/S back in line with other companies in the industry 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.

When you consider that Kencoa Aerospace's revenue growth estimates are fairly muted compared to the broader industry, it's easy to see why we consider it unexpected to be trading at its current P/S ratio. At present, we aren't confident in the P/S as the predicted future revenues aren't likely to support a more positive sentiment for long. Circumstances like this present a risk to current and prospective investors who may see share prices fall if the low revenue growth impacts the sentiment.

It's always necessary to consider the ever-present spectre of investment risk. We've identified 1 warning sign with Kencoa Aerospace, and understanding should be part of your investment process.

If you're unsure about the strength of Kencoa Aerospace'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.