The Market Lifts Wonik Corporation (KOSDAQ:032940) Shares 40% But It Can Do More

The Wonik Corporation (KOSDAQ:032940) share price has done very well over the last month, posting an excellent gain of 40%. The annual gain comes to 147% following the latest surge, making investors sit up and take notice.

In spite of the firm bounce in price, given about half the companies operating in Korea's Healthcare industry have price-to-sales ratios (or "P/S") above 1.7x, you may still consider Wonik as an attractive investment with its 1.2x P/S ratio. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the reduced P/S.

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See our latest analysis for Wonik

How Wonik Has Been Performing

Revenue has risen at a steady rate over the last year for Wonik, which is generally not a bad outcome. It might be that many expect the respectable revenue performance to degrade, which has repressed the P/S. Those who are bullish on Wonik will be hoping that this isn't the case, so that they can pick up the stock at a lower valuation.

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

Is There Any Revenue Growth Forecasted For Wonik?

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

Taking a look back first, we see that the company managed to grow revenues by a handy 4.9% last year. The latest three year period has also seen an excellent 47% overall rise in revenue, aided somewhat by its short-term performance. Therefore, it's fair to say the revenue growth recently has been superb for the company.

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.

The Final Word

Wonik's stock price has surged recently, but its but its P/S still remains modest. Generally, our preference is to limit the use of the price-to-sales ratio to establishing what the market thinks about the overall health of a company.

The fact that Wonik currently trades at a low P/S relative to the industry is unexpected considering its recent three-year growth is in line with the wider industry forecast. There could be some unobserved threats to revenue preventing the P/S ratio from matching the company's performance. At least the risk of a price drop looks to be subdued if recent medium-term revenue trends continue, but investors seem to think future revenue could see some volatility.

And what about other risks? Every company has them, and we've spotted 3 warning signs for Wonik (of which 1 shouldn't be ignored!) you should know about.

If these risks are making you reconsider your opinion on Wonik, explore our interactive list of high quality stocks to get an idea of what else is out there.

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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.