HANJOO ART Co.,LTD.'s (KOSDAQ:058450) P/S Is Still On The Mark Following 54% Share Price Bounce

HANJOO ART Co.,LTD. (KOSDAQ:058450) shareholders are no doubt pleased to see that the share price has bounced 54% in the last month, although it is still struggling to make up recently lost ground. But the last month did very little to improve the 73% share price decline over the last year.

Since its price has surged higher, you could be forgiven for thinking HANJOO ARTLTD is a stock not worth researching with a price-to-sales ratios (or "P/S") of 1.3x, considering almost half the companies in Korea's Chemicals industry have P/S ratios below 0.7x. However, the P/S might be high for a reason and it requires further investigation to determine if it's justified.

We've discovered 5 warning signs about HANJOO ARTLTD. View them for free.

See our latest analysis for HANJOO ARTLTD

How Has HANJOO ARTLTD Performed Recently?

Recent times have been quite advantageous for HANJOO ARTLTD as its revenue has been rising very briskly. Perhaps the market is expecting future revenue performance to outperform the wider market, which has seemingly got people interested in the stock. However, if this isn't the case, investors might get caught out paying too much for the stock.

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 HANJOO ARTLTD's earnings, revenue and cash flow.

How Is HANJOO ARTLTD's Revenue Growth Trending?

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

Retrospectively, the last year delivered an exceptional 36% gain to the company's top line. The latest three year period has also seen an excellent 171% overall rise in revenue, aided by its short-term performance. So we can start by confirming that the company has done a great job of growing revenue over that time.

Comparing that recent medium-term revenue trajectory with the industry's one-year growth forecast of 10% shows it's noticeably more attractive.

With this in consideration, it's not hard to understand why HANJOO ARTLTD's P/S is high relative to its industry peers. It seems most investors are expecting this strong growth to continue and are willing to pay more for the stock.

What Does HANJOO ARTLTD's P/S Mean For Investors?

HANJOO ARTLTD's P/S is on the rise since its shares have risen strongly. 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.

It's no surprise that HANJOO ARTLTD can support its high P/S given the strong revenue growth its experienced over the last three-year is superior to the current industry outlook. In the eyes of shareholders, the probability of a continued growth trajectory is great enough to prevent the P/S from pulling back. Unless the recent medium-term conditions change, they will continue to provide strong support to the share price.

There are also other vital risk factors to consider and we've discovered 5 warning signs for HANJOO ARTLTD (3 are potentially serious!) that you should be aware of before investing here.

If strong companies turning a profit tickle your fancy, then you'll want to check out this free list of interesting companies that trade on a low P/E (but have proven they can grow earnings).

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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.