IL Science Co., Ltd. (KOSDAQ:307180) Stock's 25% Dive Might Signal An Opportunity But It Requires Some Scrutiny

IL Science Co., Ltd. (KOSDAQ:307180) shareholders that were waiting for something to happen have been dealt a blow with a 25% share price drop in the last month. The drop over the last 30 days has capped off a tough year for shareholders, with the share price down 23% in that time.

In spite of the heavy fall in price, there still wouldn't be many who think IL Science's price-to-sales (or "P/S") ratio of 0.9x is worth a mention when it essentially matches the median P/S in Korea's Electrical industry. However, investors might be overlooking a clear opportunity or potential setback if there is no rational basis for the P/S.

View our latest analysis for IL Science

What Does IL Science's Recent Performance Look Like?

With revenue growth that's exceedingly strong of late, IL Science has been doing very well. Perhaps the market is expecting future revenue performance to taper off, which has kept the P/S from rising. If that doesn't eventuate, then existing shareholders have reason to be feeling optimistic about the future direction of the share price.

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 IL Science's earnings, revenue and cash flow.

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

IL Science's P/S ratio would be typical for a company that's only expected to deliver moderate growth, and importantly, perform in line with the industry.

Taking a look back first, we see that the company grew revenue by an impressive 64% last year. The strong recent performance means it was also able to grow revenue by 121% in total over the last three years. So we can start by confirming that the company has done a great job of growing revenue over that time.

When compared to the industry's one-year growth forecast of 14%, the most recent medium-term revenue trajectory is noticeably more alluring

In light of this, it's curious that IL Science'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.

What Does IL Science's P/S Mean For Investors?

IL Science's plummeting stock price has brought its P/S back to a similar region as the rest of the industry. 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.

We've established that IL Science currently trades on a lower than expected P/S since its recent three-year growth is higher than the wider industry forecast. There could be some unobserved threats to revenue preventing the P/S ratio from matching this positive performance. 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.

Having said that, be aware IL Science is showing 4 warning signs in our investment analysis, and 2 of those are concerning.

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.