The Price Is Right For Youil Energy Tech Co.,Ltd. (KOSDAQ:340930)

Youil Energy Tech Co.,Ltd.'s (KOSDAQ:340930) price-to-sales (or "P/S") ratio of 1.6x may not look like an appealing investment opportunity when you consider close to half the companies in the Electrical industry in Korea have P/S ratios below 1.1x. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the elevated P/S.

See our latest analysis for Youil Energy TechLtd

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

The revenue growth achieved at Youil Energy TechLtd over the last year would be more than acceptable for most companies. One possibility is that the P/S ratio is high because investors think this respectable revenue growth will be enough to outperform the broader industry in the near future. However, if this isn't the case, investors might get caught out paying too much for the stock.

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 Youil Energy TechLtd's earnings, revenue and cash flow.

How Is Youil Energy TechLtd's Revenue Growth Trending?

In order to justify its P/S ratio, Youil Energy TechLtd would need to produce impressive growth in excess of the industry.

Retrospectively, the last year delivered a decent 10% gain to the company's revenues. This was backed up an excellent period prior to see revenue up by 81% in total over the last three years. So we can start by confirming that the company has done a great job of growing revenues over that time.

Comparing that recent medium-term revenue trajectory with the industry's one-year growth forecast of 4.3% shows it's noticeably more attractive.

With this information, we can see why Youil Energy TechLtd is trading at such a high P/S compared to the industry. It seems most investors are expecting this strong growth to continue and are willing to pay more for the stock.

The Bottom Line On Youil Energy TechLtd's P/S

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.

As we suspected, our examination of Youil Energy TechLtd revealed its three-year revenue trends are contributing to its high P/S, given they look better than current industry expectations. Right now shareholders are comfortable with the P/S as they are quite confident revenue aren't under threat. Barring any significant changes to the company's ability to make money, the share price should continue to be propped up.

It's always necessary to consider the ever-present spectre of investment risk. We've identified 4 warning signs with Youil Energy TechLtd (at least 3 which make us uncomfortable), and understanding them should be part of your investment process.

If strong companies turning a profit tickle your fancy, then you'll want to check out this free list of interesting companies that trade on a low P/E (but have proven they can grow earnings).

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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.