MNtech Co., Ltd. (KOSDAQ:095500) Stock Rockets 60% But Many Are Still Ignoring The Company

MNtech Co., Ltd. (KOSDAQ:095500) shares have had a really impressive month, gaining 60% after a shaky period beforehand. The bad news is that even after the stocks recovery in the last 30 days, shareholders are still underwater by about 5.4% over the last year.

Even after such a large jump in price, it's still not a stretch to say that MNtech's price-to-sales (or "P/S") ratio of 1x right now seems quite "middle-of-the-road" compared to the Chemicals industry in Korea, where the median P/S ratio is around 0.8x. While this might not raise any eyebrows, if the P/S ratio is not justified investors could be missing out on a potential opportunity or ignoring looming disappointment.

Check out our latest analysis for MNtech

What Does MNtech's Recent Performance Look Like?

The revenue growth achieved at MNtech over the last year would be more than acceptable for most companies. Perhaps the market is expecting future revenue performance to only keep up with the broader industry, which has keeping the P/S in line with expectations. Those who are bullish on MNtech will be hoping that this isn't the case, so that they can pick up the stock at a lower valuation.

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 MNtech's earnings, revenue and cash flow.

How Is MNtech's Revenue Growth Trending?

MNtech's P/S ratio would be typical for a company that's only expected to deliver moderate growth, and importantly, perform in line with the industry.

If we review the last year of revenue growth, the company posted a terrific increase of 28%. The latest three year period has also seen an excellent 68% 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 3.1% shows it's noticeably more attractive.

In light of this, it's curious that MNtech's P/S sits in line with the majority of other companies. It may be that most investors are not convinced the company can maintain its recent growth rates.

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

MNtech's stock has a lot of momentum behind it lately, which has brought its P/S level with the rest of the industry. It's argued the price-to-sales ratio is an inferior measure of value within certain industries, but it can be a powerful business sentiment indicator.

We've established that MNtech currently trades on a lower than expected P/S since its recent three-year growth is higher than the wider industry forecast. It'd be fair to assume that potential risks the company faces could be the contributing factor to the lower than expected P/S. At least the risk of a price drop looks to be subdued if recent medium-term revenue trends continue, but investors seem to think future revenue could see some volatility.

And what about other risks? Every company has them, and we've spotted 3 warning signs for MNtech (of which 1 is potentially serious!) you should know about.

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.