Market Might Still Lack Some Conviction On Bonne Co., Ltd. (KOSDAQ:226340) Even After 25% Share Price Boost

Bonne Co., Ltd. (KOSDAQ:226340) shares have had a really impressive month, gaining 25% after a shaky period beforehand. The annual gain comes to 105% following the latest surge, making investors sit up and take notice.

Even after such a large jump in price, there still wouldn't be many who think Bonne's price-to-sales (or "P/S") ratio of 1.4x is worth a mention when the median P/S in Korea's Personal Products industry is similar at about 1.2x. Although, it's not wise to simply ignore the P/S without explanation as investors may be disregarding a distinct opportunity or a costly mistake.

Check out our latest analysis for Bonne

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

With its revenue growth in positive territory compared to the declining revenue of most other companies, Bonne has been doing quite well of late. It might be that many expect the strong revenue performance to deteriorate like the rest, which has kept the P/S ratio from rising. If not, then existing shareholders have reason to be feeling optimistic about the future direction of the share price.

Want the full picture on analyst estimates for the company? Then our free report on Bonne will help you uncover what's on the horizon.

How Is Bonne's Revenue Growth Trending?

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

Retrospectively, the last year delivered an exceptional 20% gain to the company's top line. The strong recent performance means it was also able to grow revenue by 102% in total over the last three years. So we can start by confirming that the company has done a great job of growing revenue over that time.

Looking ahead now, revenue is anticipated to climb by 47% during the coming year according to the dual analysts following the company. With the industry only predicted to deliver 18%, the company is positioned for a stronger revenue result.

With this information, we find it interesting that Bonne is trading at a fairly similar P/S compared to the industry. Apparently some shareholders are skeptical of the forecasts and have been accepting lower selling prices.

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

Its shares have lifted substantially and now Bonne's P/S is back within range of the industry median. 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.

Despite enticing revenue growth figures that outpace the industry, Bonne's P/S isn't quite what we'd expect. There could be some risks that the market is pricing in, which is preventing the P/S ratio from matching the positive outlook. This uncertainty seems to be reflected in the share price which, while stable, could be higher given the revenue forecasts.

Before you settle on your opinion, we've discovered 4 warning signs for Bonne (1 can't be ignored!) that 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.