Market Participants Recognise KEPCO Engineering & Construction Company, Inc.'s (KRX:052690) Revenues Pushing Shares 26% Higher

KEPCO Engineering & Construction Company, Inc. (KRX:052690) shareholders would be excited to see that the share price has had a great month, posting a 26% gain and recovering from prior weakness. Longer-term shareholders would be thankful for the recovery in the share price since it's now virtually flat for the year after the recent bounce.

After such a large jump in price, you could be forgiven for thinking KEPCO Engineering & Construction Company is a stock to steer clear of with a price-to-sales ratios (or "P/S") of 4.8x, considering almost half the companies in Korea's Construction industry have P/S ratios below 0.3x. However, the P/S might be quite high for a reason and it requires further investigation to determine if it's justified.

Check out our latest analysis for KEPCO Engineering & Construction Company

What Does KEPCO Engineering & Construction Company's Recent Performance Look Like?

With revenue growth that's inferior to most other companies of late, KEPCO Engineering & Construction Company has been relatively sluggish. It might be that many expect the uninspiring revenue performance to recover significantly, which has kept the P/S ratio from collapsing. If not, then existing shareholders may be very nervous about the viability of the share price.

If you'd like to see what analysts are forecasting going forward, you should check out our free report on KEPCO Engineering & Construction Company.

How Is KEPCO Engineering & Construction Company's Revenue Growth Trending?

In order to justify its P/S ratio, KEPCO Engineering & Construction Company would need to produce outstanding growth that's well in excess of the industry.

If we review the last year of revenue growth, the company posted a worthy increase of 7.9%. Revenue has also lifted 26% in aggregate from three years ago, partly thanks to the last 12 months of growth. Therefore, it's fair to say the revenue growth recently has been respectable for the company.

Shifting to the future, estimates from the three analysts covering the company suggest revenue should grow by 11% per annum over the next three years. With the industry only predicted to deliver 4.2% per year, the company is positioned for a stronger revenue result.

With this in mind, it's not hard to understand why KEPCO Engineering & Construction Company's P/S is high relative to its industry peers. Apparently shareholders aren't keen to offload something that is potentially eyeing a more prosperous future.

The Final Word

KEPCO Engineering & Construction Company's P/S has grown nicely over the last month thanks to a handy boost in the share price. Typically, we'd caution against reading too much into price-to-sales ratios when settling on investment decisions, though it can reveal plenty about what other market participants think about the company.

Our look into KEPCO Engineering & Construction Company shows that its P/S ratio remains high on the merit of its strong future revenues. It appears that shareholders are confident in the company's future revenues, which is propping up the P/S. It's hard to see the share price falling strongly in the near future under these circumstances.

The company's balance sheet is another key area for risk analysis. Take a look at our free balance sheet analysis for KEPCO Engineering & Construction Company with six simple checks on some of these key factors.

If you're unsure about the strength of KEPCO Engineering & Construction Company'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.