Market Might Still Lack Some Conviction On Wonik Corporation (KOSDAQ:032940) Even After 35% Share Price Boost

Wonik Corporation (KOSDAQ:032940) shareholders have had their patience rewarded with a 35% share price jump in the last month. Looking further back, the 16% rise over the last twelve months isn't too bad notwithstanding the strength over the last 30 days.

Although its price has surged higher, Wonik's price-to-sales (or "P/S") ratio of 0.6x might still make it look like a buy right now compared to the Healthcare industry in Korea, where around half of the companies have P/S ratios above 1.5x and even P/S above 4x are quite common. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's limited.

See our latest analysis for Wonik

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

The revenue growth achieved at Wonik over the last year would be more than acceptable for most companies. It might be that many expect the respectable revenue performance to degrade substantially, which has repressed the P/S. 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 out of favour.

We don't have analyst forecasts, but you can see how recent trends are setting up the company for the future by checking out our free report on Wonik's earnings, revenue and cash flow.

Is There Any Revenue Growth Forecasted For Wonik?

The only time you'd be truly comfortable seeing a P/S as low as Wonik's is when the company's growth is on track to lag the industry.

Retrospectively, the last year delivered a decent 9.5% gain to the company's revenues. Pleasingly, revenue has also lifted 54% in aggregate from three years ago, partly thanks to the last 12 months of growth. Accordingly, shareholders would have definitely welcomed those medium-term rates of revenue growth.

Comparing that to the industry, which is predicted to deliver 16% growth in the next 12 months, the company's momentum is pretty similar based on recent medium-term annualised revenue results.

With this in consideration, we find it intriguing that Wonik's P/S falls short of its industry peers. Apparently some shareholders are more bearish than recent times would indicate and have been accepting lower selling prices.

What Does Wonik's P/S Mean For Investors?

Wonik's stock price has surged recently, but its but its P/S still remains modest. Using the price-to-sales ratio alone to determine if you should sell your stock isn't sensible, however it can be a practical guide to the company's future prospects.

Our examination of Wonik revealed its three-year revenue trends looking similar to current industry expectations hasn't given the P/S the boost we expected, given that it's lower than the wider industry P/S, There could be some unobserved threats to revenue preventing the P/S ratio from matching the company's performance. It appears some are indeed anticipating revenue instability, because the persistence of these recent medium-term conditions should normally provide more support to the share price.

There are also other vital risk factors to consider and we've discovered 3 warning signs for Wonik (1 is a bit unpleasant!) that you should be aware of before investing here.

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.