Investors Still Aren't Entirely Convinced By Kumyang Green Power Co., Ltd.'s (KOSDAQ:282720) Revenues Despite 37% Price Jump

Kumyang Green Power Co., Ltd. (KOSDAQ:282720) shareholders would be excited to see that the share price has had a great month, posting a 37% gain and recovering from prior weakness. Not all shareholders will be feeling jubilant, since the share price is still down a very disappointing 24% in the last twelve months.

In spite of the firm bounce in price, it's still not a stretch to say that Kumyang Green Power's price-to-sales (or "P/S") ratio of 0.6x right now seems quite "middle-of-the-road" compared to the Construction industry in Korea, where the median P/S ratio is around 0.2x. However, investors might be overlooking a clear opportunity or potential setback if there is no rational basis for the P/S.

We've discovered 3 warning signs about Kumyang Green Power. View them for free.

View our latest analysis for Kumyang Green Power

What Does Kumyang Green Power's Recent Performance Look Like?

It looks like revenue growth has deserted Kumyang Green Power recently, which is not something to boast about. Perhaps the market believes the recent run-of-the-mill revenue performance isn't enough to outperform the industry, which has kept the P/S muted. If you like the company, you'd be hoping this isn't the case so that you could potentially pick up some stock while it's not quite in favour.

We don't have analyst forecasts, but you can see how recent trends are setting up the company for the future by checking out our free report on Kumyang Green Power's earnings, revenue and cash flow.

What Are Revenue Growth Metrics Telling Us About The P/S?

There's an inherent assumption that a company should be matching the industry for P/S ratios like Kumyang Green Power's to be considered reasonable.

Taking a look back first, we see that there was hardly any revenue growth to speak of for the company over the past year. Still, the latest three year period has seen an excellent 41% overall rise in revenue, in spite of its uninspiring short-term performance. So while the company has done a solid job in the past, it's somewhat concerning to see revenue growth decline as much as it has.

When compared to the industry's one-year growth forecast of 0.4%, the most recent medium-term revenue trajectory is noticeably more alluring

In light of this, it's curious that Kumyang Green Power's P/S sits in line with the majority of other companies. It may be that most investors are not convinced the company can maintain its recent growth rates.

The Final Word

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

To our surprise, Kumyang Green Power revealed its three-year revenue trends aren't contributing to its P/S as much as we would have predicted, given they look better than current industry expectations. It'd be fair to assume that potential risks the company faces could be the contributing factor to the lower than expected P/S. It appears some are indeed anticipating revenue instability, because the persistence of these recent medium-term conditions would normally provide a boost to the share price.

Don't forget that there may be other risks. For instance, we've identified 3 warning signs for Kumyang Green Power (1 can't be ignored) you should be aware of.

If these risks are making you reconsider your opinion on Kumyang Green Power, explore our interactive list of high quality stocks to get an idea of what else is out there.

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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.