Revenues Tell The Story For GS Retail Co., Ltd. (KRX:007070) As Its Stock Soars 26%

GS Retail Co., Ltd. (KRX:007070) shareholders have had their patience rewarded with a 26% share price jump in the last month. Not all shareholders will be feeling jubilant, since the share price is still down a very disappointing 18% in the last twelve months.

Even after such a large jump in price, there still wouldn't be many who think GS Retail's price-to-sales (or "P/S") ratio of 0.1x is worth a mention when the median P/S in Korea's Consumer Retailing industry is similar at about 0.2x. 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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Check out our latest analysis for GS Retail

How GS Retail Has Been Performing

GS Retail's revenue growth of late has been pretty similar to most other companies. The P/S ratio is probably moderate because investors think this modest revenue performance will continue. Those who are bullish on GS Retail will be hoping that revenue performance can pick up, so that they can pick up the stock at a slightly lower valuation.

Want the full picture on analyst estimates for the company? Then our free report on GS Retail will help you uncover what's on the horizon.

How Is GS Retail's Revenue Growth Trending?

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

Taking a look back first, we see that the company managed to grow revenues by a handy 3.3% last year. Revenue has also lifted 9.5% in aggregate from three years ago, partly thanks to the last 12 months of growth. So we can start by confirming that the company has actually done a good job of growing revenue over that time.

Shifting to the future, estimates from the analysts covering the company suggest revenue should grow by 3.4% over the next year. That's shaping up to be similar to the 5.0% growth forecast for the broader industry.

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

What We Can Learn From GS Retail's P/S?

GS Retail's stock has a lot of momentum behind it lately, which has brought its P/S level with the rest of the industry. 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've seen that GS Retail maintains an adequate P/S seeing as its revenue growth figures match the rest of the industry. Right now shareholders are comfortable with the P/S as they are quite confident future revenue won't throw up any surprises. All things considered, if the P/S and revenue estimates contain no major shocks, then it's hard to see the share price moving strongly in either direction in the near future.

There are also other vital risk factors to consider before investing and we've discovered 1 warning sign for GS Retail that you should be aware of.

If strong companies turning a profit tickle your fancy, then you'll want to check out this free list of interesting companies that trade on a low P/E (but have proven they can grow earnings).

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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.