Why We're Not Concerned Yet About Vuno Inc.'s (KOSDAQ:338220) 28% Share Price Plunge

To the annoyance of some shareholders, Vuno Inc. (KOSDAQ:338220) shares are down a considerable 28% in the last month, which continues a horrid run for the company. The drop over the last 30 days has capped off a tough year for shareholders, with the share price down 44% in that time.

Even after such a large drop in price, given around half the companies in Korea's Medical Equipment industry have price-to-sales ratios (or "P/S") below 2.2x, you may still consider Vuno as a stock to avoid entirely with its 8.8x P/S ratio. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's so lofty.

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View our latest analysis for Vuno

What Does Vuno's Recent Performance Look Like?

With revenue growth that's superior to most other companies of late, Vuno has been doing relatively well. It seems that many are expecting the strong revenue performance to persist, which has raised the P/S. If not, then existing shareholders might be a little nervous about the viability of the share price.

Keen to find out how analysts think Vuno's future stacks up against the industry? In that case, our free report is a great place to start .

Do Revenue Forecasts Match The High P/S Ratio?

In order to justify its P/S ratio, Vuno would need to produce outstanding growth that's well in excess of the industry.

If we review the last year of revenue growth, the company posted a terrific increase of 95%. The latest three year period has also seen an incredible overall rise in revenue, aided by its incredible short-term performance. So we can start by confirming that the company has done a tremendous job of growing revenue over that time.

Shifting to the future, estimates from the two analysts covering the company suggest revenue should grow by 62% over the next year. With the industry only predicted to deliver 35%, the company is positioned for a stronger revenue result.

With this information, we can see why Vuno is trading at such a high P/S compared to the industry. Apparently shareholders aren't keen to offload something that is potentially eyeing a more prosperous future.

The Final Word

A significant share price dive has done very little to deflate Vuno's very lofty P/S. 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.

As we suspected, our examination of Vuno's analyst forecasts revealed that its superior revenue outlook is contributing to its high P/S. It appears that shareholders are confident in the company's future revenues, which is propping up the P/S. Unless these conditions change, they will continue to provide strong support to the share price.

You always need to take note of risks, for example - Vuno has 1 warning sign we think 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).

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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.