Investors Appear Satisfied With Raphas Co., Ltd.'s (KOSDAQ:214260) Prospects As Shares Rocket 28%

Raphas Co., Ltd. (KOSDAQ:214260) shares have continued their recent momentum with a 28% gain in the last month alone. Unfortunately, the gains of the last month did little to right the losses of the last year with the stock still down 27% over that time.

Following the firm bounce in price, when almost half of the companies in Korea's Personal Products industry have price-to-sales ratios (or "P/S") below 1.2x, you may consider Raphas as a stock not worth researching with its 6.2x P/S ratio. However, the P/S might be quite high for a reason and it requires further investigation to determine if it's justified.

View our latest analysis for Raphas

What Does Raphas' Recent Performance Look Like?

Raphas has been doing a decent job lately as it's been growing revenue at a reasonable pace. It might be that many expect the reasonable revenue performance to beat most other companies over the coming period, which has increased investors’ willingness to pay up for the stock. However, if this isn't the case, investors might get caught out paying too much for the stock.

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

How Is Raphas' Revenue Growth Trending?

The only time you'd be truly comfortable seeing a P/S as steep as Raphas' is when the company's growth is on track to outshine the industry decidedly.

If we review the last year of revenue growth, the company posted a worthy increase of 6.9%. The latest three year period has also seen an excellent 72% 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 recent medium-term revenue trajectory with the industry's one-year growth forecast of 16% shows it's noticeably more attractive.

In light of this, it's understandable that Raphas' P/S sits above the majority of other companies. 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 Raphas' P/S?

The strong share price surge has lead to Raphas' P/S soaring as well. 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.

We've established that Raphas maintains its high P/S on the strength of its recent three-year growth being higher than the wider industry forecast, as expected. At this stage investors feel the potential continued revenue growth in the future is great enough to warrant an inflated P/S. If recent medium-term revenue trends continue, it's hard to see the share price falling strongly in the near future under these circumstances.

Before you settle on your opinion, we've discovered 2 warning signs for Raphas that you should be aware of.

If you're unsure about the strength of Raphas' business, why not explore our interactive list of stocks with solid business fundamentals for some other companies you may have missed.

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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.