GGUMBI Inc. (KOSDAQ:407400) Stocks Shoot Up 62% But Its P/S Still Looks Reasonable

The GGUMBI Inc. (KOSDAQ:407400) share price has done very well over the last month, posting an excellent gain of 62%. The last 30 days bring the annual gain to a very sharp 64%.

Since its price has surged higher, when almost half of the companies in Korea's Consumer Durables industry have price-to-sales ratios (or "P/S") below 0.4x, you may consider GGUMBI as a stock not worth researching with its 4x P/S ratio. However, the P/S might be quite high for a reason and it requires further investigation to determine if it's justified.

Trump has pledged to "unleash" American oil and gas and these 15 US stocks have developments that are poised to benefit.

See our latest analysis for GGUMBI

What Does GGUMBI's P/S Mean For Shareholders?

With revenue growth that's exceedingly strong of late, GGUMBI has been doing very well. Perhaps the market is expecting future revenue performance to outperform the wider market, which has seemingly got people interested in the stock. However, if this isn't the case, investors might get caught out paying too much for the stock.

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

How Is GGUMBI's Revenue Growth Trending?

In order to justify its P/S ratio, GGUMBI 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 terrific increase of 37%. The latest three year period has also seen an excellent 89% overall rise in revenue, aided by its short-term performance. Therefore, it's fair to say the revenue growth recently has been superb for the company.

Comparing that recent medium-term revenue trajectory with the industry's one-year growth forecast of 5.2% shows it's noticeably more attractive.

In light of this, it's understandable that GGUMBI's P/S sits above the majority of other companies. Presumably shareholders aren't keen to offload something they believe will continue to outmanoeuvre the wider industry.

What We Can Learn From GGUMBI's P/S?

Shares in GGUMBI have seen a strong upwards swing lately, which has really helped boost its P/S figure. 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.

It's no surprise that GGUMBI can support its high P/S given the strong revenue growth its experienced over the last three-year is superior to the current industry outlook. In the eyes of shareholders, the probability of a continued growth trajectory is great enough to prevent the P/S from pulling back. Unless the recent medium-term conditions change, they will continue to provide strong support to the share price.

Plus, you should also learn about these 2 warning signs we've spotted with GGUMBI .

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.