Iljeong Industrial Co.,Ltd's (KRX:008500) Shares Leap 32% Yet They're Still Not Telling The Full Story

The Iljeong Industrial Co.,Ltd (KRX:008500) share price has done very well over the last month, posting an excellent gain of 32%. Unfortunately, despite the strong performance over the last month, the full year gain of 8.4% isn't as attractive.

Even after such a large jump 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. However, investors might be overlooking a clear opportunity or potential setback if there is no rational basis for the P/S.

We've discovered 3 warning signs about Iljeong IndustrialLtd. View them for free.

View our latest analysis for Iljeong IndustrialLtd

What Does Iljeong IndustrialLtd's P/S Mean For Shareholders?

Recent times have been quite advantageous for Iljeong IndustrialLtd as its revenue has been rising very briskly. Perhaps the market is expecting future revenue performance to taper off, which has kept the P/S from rising. If that doesn't eventuate, then existing shareholders have reason to be feeling optimistic about the future direction of the share price.

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

How Is Iljeong IndustrialLtd's Revenue Growth Trending?

In order to justify its P/S ratio, Iljeong IndustrialLtd would need to produce growth that's similar to the industry.

Taking a look back first, we see that the company grew revenue by an impressive 35% last year. The strong recent performance means it was also able to grow revenue by 43% in total over the last three years. 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 7.0%, 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. Apparently some shareholders believe the recent performance is at its limits and have been accepting lower selling prices.

What Does Iljeong IndustrialLtd's P/S Mean For Investors?

Its shares have lifted substantially and now Iljeong IndustrialLtd's P/S is back within range of the industry median. It's argued the price-to-sales ratio is an inferior measure of value within certain industries, but it can be a powerful business sentiment indicator.

We didn't quite envision Iljeong IndustrialLtd's P/S sitting in line with the wider industry, considering the revenue growth over the last three-year is higher than the current industry outlook. 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. It appears some are indeed anticipating revenue instability, because the persistence of these recent medium-term conditions would normally provide a boost to the share price.

Don't forget that there may be other risks. For instance, we've identified 3 warning signs for Iljeong IndustrialLtd (1 is concerning) you should be aware of.

It's important to make sure you look for a great company, not just the first idea you come across. So if growing profitability aligns with your idea of a great company, take a peek at this free list of interesting companies with strong recent earnings growth (and a low P/E).

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.