A Piece Of The Puzzle Missing From Iljeong Industrial Co.,Ltd's (KRX:008500) 25% Share Price Climb

Iljeong Industrial Co.,Ltd (KRX:008500) shareholders have had their patience rewarded with a 25% share price jump in the last month. Unfortunately, despite the strong performance over the last month, the full year gain of 6.0% isn't as attractive.

In spite of the firm bounce in price, it's still not a stretch to say that Iljeong IndustrialLtd's price-to-sales (or "P/S") ratio of 0.4x right now seems quite "middle-of-the-road" compared to the Luxury industry in Korea, seeing as it matches the P/S ratio of the wider industry. Although, it's not wise to simply ignore the P/S without explanation as investors may be disregarding a distinct opportunity or a costly mistake.

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See our latest analysis for Iljeong IndustrialLtd

How Has Iljeong IndustrialLtd Performed Recently?

The revenue growth achieved at Iljeong IndustrialLtd over the last year would be more than acceptable for most companies. One possibility is that the P/S is moderate because investors think this respectable revenue growth might not be enough to outperform the broader industry in the near future. If you like the company, you'd be hoping this isn't the case so that you could potentially pick up some stock while it's not quite in favour.

Although there are no analyst estimates available for Iljeong IndustrialLtd, take a look at this free data-rich visualisation to see how the company stacks up on earnings, revenue and cash flow.

Is There Some Revenue Growth Forecasted For Iljeong IndustrialLtd?

There's an inherent assumption that a company should be matching the industry for P/S ratios like Iljeong IndustrialLtd's to be considered reasonable.

If we review the last year of revenue growth, the company posted a terrific increase of 16%. The latest three year period has also seen an excellent 53% overall rise in revenue, aided by its short-term performance. 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 6.4%, the most recent medium-term revenue trajectory is noticeably more alluring

With this information, we find it interesting that Iljeong IndustrialLtd 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 Final Word

Iljeong IndustrialLtd's stock has a lot of momentum behind it lately, which has brought its P/S level with the rest of the industry. 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.

We've established that Iljeong IndustrialLtd currently trades on a lower than expected P/S since its recent three-year growth is higher than the wider industry forecast. 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. While recent revenue trends over the past medium-term suggest that the risk of a price decline is low, investors appear to see the likelihood of revenue fluctuations in the future.

Before you take the next step, you should know about the 3 warning signs for Iljeong IndustrialLtd (2 make us uncomfortable!) that we have uncovered.

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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.