Y2 Solution Co., Ltd (KRX:011690) Looks Just Right With A 26% Price Jump

Those holding Y2 Solution Co., Ltd (KRX:011690) shares would be relieved that the share price has rebounded 26% in the last thirty days, but it needs to keep going to repair the recent damage it has caused to investor portfolios. Not all shareholders will be feeling jubilant, since the share price is still down a very disappointing 18% in the last twelve months.

Although its price has surged higher, it's still not a stretch to say that Y2 Solution's price-to-sales (or "P/S") ratio of 0.8x 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. However, investors might be overlooking a clear opportunity or potential setback if there is no rational basis for the P/S.

See our latest analysis for Y2 Solution

How Has Y2 Solution Performed Recently?

Y2 Solution certainly has been doing a great job lately as it's been growing its revenue at a really rapid pace. It might be that many expect the strong revenue performance to wane, which has kept the share price, and thus the P/S ratio, 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 Y2 Solution's earnings, revenue and cash flow.

Do Revenue Forecasts Match The P/S Ratio?

In order to justify its P/S ratio, Y2 Solution 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 36%. Pleasingly, revenue has also lifted 49% 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.

It's interesting to note that the rest of the industry is similarly expected to grow by 12% over the next year, which is fairly even with the company's recent medium-term annualised growth rates.

In light of this, it's understandable that Y2 Solution's P/S sits in line with the majority of other companies. It seems most investors are expecting to see average growth rates continue into the future and are only willing to pay a moderate amount for the stock.

The Bottom Line On Y2 Solution's P/S

Y2 Solution appears to be back in favour with a solid price jump bringing its P/S back in line with other companies in 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.

As we've seen, Y2 Solution's three-year revenue trends seem to be contributing to its P/S, given they look similar to current industry expectations. Right now shareholders are comfortable with the P/S as they are quite confident future revenue won't throw up any surprises. Given the current circumstances, it seems improbable that the share price will experience any significant movement in either direction in the near future if recent medium-term revenue trends persist.

Don't forget that there may be other risks. For instance, we've identified 3 warning signs for Y2 Solution that you should be aware of.

If you're unsure about the strength of Y2 Solution'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.