Further Upside For Youil Energy Tech Co.,Ltd. (KOSDAQ:340930) Shares Could Introduce Price Risks After 94% Bounce

Youil Energy Tech Co.,Ltd. (KOSDAQ:340930) shareholders would be excited to see that the share price has had a great month, posting a 94% gain and recovering from prior weakness. Unfortunately, the gains of the last month did little to right the losses of the last year with the stock still down 21% over that time.

Even after such a large jump in price, it's still not a stretch to say that Youil Energy TechLtd's price-to-sales (or "P/S") ratio of 1.5x right now seems quite "middle-of-the-road" compared to the Electrical industry in Korea, where the median P/S ratio is around 1.1x. 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 Youil Energy TechLtd

What Does Youil Energy TechLtd's Recent Performance Look Like?

Recent times have been quite advantageous for Youil Energy TechLtd as its revenue has been rising very briskly. Perhaps the market is expecting future revenue performance to taper off, which has kept the P/S from rising. Those who are bullish on Youil Energy TechLtd will be hoping that this isn't the case, so that they can pick up the stock at a lower valuation.

Want the full picture on earnings, revenue and cash flow for the company? Then our free report on Youil Energy TechLtd will help you shine a light on its historical performance.

Do Revenue Forecasts Match The P/S Ratio?

In order to justify its P/S ratio, Youil Energy TechLtd would need to produce growth that's similar to the industry.

If we review the last year of revenue growth, the company posted a terrific increase of 61%. Pleasingly, revenue has also lifted 92% in aggregate from three years ago, thanks to the last 12 months of growth. 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 5.6%, the most recent medium-term revenue trajectory is noticeably more alluring

With this information, we find it interesting that Youil Energy TechLtd is trading at a fairly similar P/S compared to the industry. It may be that most investors are not convinced the company can maintain its recent growth rates.

The Key Takeaway

Youil Energy TechLtd appears to be back in favour with a solid price jump bringing its P/S back in line with other companies in the industry It's argued the price-to-sales ratio is an inferior measure of value within certain industries, but it can be a powerful business sentiment indicator.

To our surprise, Youil Energy TechLtd 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. When we see strong revenue with faster-than-industry growth, we can only assume potential risks are what might be placing pressure on the P/S ratio. At least the risk of a price drop looks to be subdued if recent medium-term revenue trends continue, but investors seem to think future revenue could see some volatility.

Don't forget that there may be other risks. For instance, we've identified 4 warning signs for Youil Energy TechLtd (3 can't be ignored) you should be aware of.

If these risks are making you reconsider your opinion on Youil Energy TechLtd, 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.