SAMRYOONG Co.,Ltd's (KOSDAQ:014970) 32% Price Boost Is Out Of Tune With Revenues

The SAMRYOONG Co.,Ltd (KOSDAQ:014970) share price has done very well over the last month, posting an excellent gain of 32%. Notwithstanding the latest gain, the annual share price return of 6.6% isn't as impressive.

Although its price has surged higher, you could still be forgiven for feeling indifferent about SAMRYOONGLtd's P/S ratio of 0.6x, since the median price-to-sales (or "P/S") ratio for the Packaging industry in Korea is also close to 0.4x. However, investors might be overlooking a clear opportunity or potential setback if there is no rational basis for the P/S.

Our free stock report includes 2 warning signs investors should be aware of before investing in SAMRYOONGLtd. Read for free now.

Check out our latest analysis for SAMRYOONGLtd

How SAMRYOONGLtd Has Been Performing

SAMRYOONGLtd has been doing a good job lately as it's been growing revenue at a solid pace. It might be that many expect the respectable revenue performance to wane, which has kept the P/S from rising. If you like the company, you'd be hoping this isn't the case so that you could potentially pick up some stock while it's not quite in favour.

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 SAMRYOONGLtd's earnings, revenue and cash flow.

How Is SAMRYOONGLtd's Revenue Growth Trending?

The only time you'd be comfortable seeing a P/S like SAMRYOONGLtd's is when the company's growth is tracking the industry closely.

Retrospectively, the last year delivered a decent 9.0% gain to the company's revenues. The solid recent performance means it was also able to grow revenue by 7.2% in total over the last three years. Accordingly, shareholders would have probably been satisfied with the medium-term rates of revenue growth.

Comparing that to the industry, which is predicted to deliver 21% growth in the next 12 months, the company's momentum is weaker, based on recent medium-term annualised revenue results.

In light of this, it's curious that SAMRYOONGLtd's P/S sits in line with the majority of other companies. It seems most investors are ignoring the fairly limited recent growth rates and are willing to pay up for exposure to the stock. They may be setting themselves up for future disappointment if the P/S falls to levels more in line with recent growth rates.

The Bottom Line On SAMRYOONGLtd's P/S

SAMRYOONGLtd appears to be back in favour with a solid price jump bringing its P/S back in line with other companies in the industry Typically, we'd caution against reading too much into price-to-sales ratios when settling on investment decisions, though it can reveal plenty about what other market participants think about the company.

Our examination of SAMRYOONGLtd revealed its poor three-year revenue trends aren't resulting in a lower P/S as per our expectations, given they look worse than current industry outlook. Right now we are uncomfortable with the P/S as this revenue performance isn't likely to support a more positive sentiment for long. Unless the recent medium-term conditions improve, it's hard to accept the current share price as fair value.

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

Of course, profitable companies with a history of great earnings growth are generally safer bets. So you may wish to see this free collection of other companies that have reasonable P/E ratios and have grown earnings strongly.

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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.