SEOULEAGUER Co., Ltd.'s (KOSDAQ:043710) P/S Is Still On The Mark Following 26% Share Price Bounce

Despite an already strong run, SEOULEAGUER Co., Ltd. (KOSDAQ:043710) shares have been powering on, with a gain of 26% in the last thirty days. The last 30 days bring the annual gain to a very sharp 45%.

Following the firm bounce in price, given around half the companies in Korea's Healthcare industry have price-to-sales ratios (or "P/S") below 1.8x, you may consider SEOULEAGUER as a stock to avoid entirely with its 4x P/S ratio. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the highly elevated P/S.

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Check out our latest analysis for SEOULEAGUER

How Has SEOULEAGUER Performed Recently?

For example, consider that SEOULEAGUER's financial performance has been poor lately as its revenue has been in decline. Perhaps the market believes the company can do enough to outperform the rest of the industry in the near future, which is keeping the P/S ratio high. If not, then existing shareholders may be quite nervous about the viability of the share price.

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 SEOULEAGUER's earnings, revenue and cash flow.

Is There Enough Revenue Growth Forecasted For SEOULEAGUER?

SEOULEAGUER's P/S ratio would be typical for a company that's expected to deliver very strong growth, and importantly, perform much better than the industry.

In reviewing the last year of financials, we were disheartened to see the company's revenues fell to the tune of 2.7%. Even so, admirably revenue has lifted 127% in aggregate from three years ago, notwithstanding the last 12 months. So we can start by confirming that the company has generally done a very good job of growing revenue over that time, even though it had some hiccups along the way.

Comparing that recent medium-term revenue trajectory with the industry's one-year growth forecast of 15% shows it's noticeably more attractive.

With this information, we can see why SEOULEAGUER is trading at such a high P/S compared to the industry. It seems most investors are expecting this strong growth to continue and are willing to pay more for the stock.

What We Can Learn From SEOULEAGUER's P/S?

SEOULEAGUER's P/S has grown nicely over the last month thanks to a handy boost in the share price. We'd say the price-to-sales ratio's power isn't primarily as a valuation instrument but rather to gauge current investor sentiment and future expectations.

We've established that SEOULEAGUER maintains its high P/S on the strength of its recent three-year growth being higher than the wider industry forecast, as expected. Right now shareholders are comfortable with the P/S as they are quite confident revenue aren't under threat. Barring any significant changes to the company's ability to make money, the share price should continue to be propped up.

It is also worth noting that we have found 4 warning signs for SEOULEAGUER (2 don't sit too well with us!) that you need to take into consideration.

If these risks are making you reconsider your opinion on SEOULEAGUER, 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.