Stock Analysis

Shareholders Should Be Pleased With Jeonjinbio Co., Ltd.'s (KOSDAQ:110020) Price

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Jeonjinbio Co., Ltd.'s (KOSDAQ:110020) price-to-sales (or "P/S") ratio of 3.7x may look like a poor investment opportunity when you consider close to half the companies in the Chemicals industry in Korea have P/S ratios below 0.8x. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the highly elevated P/S.

See our latest analysis for Jeonjinbio

KOSDAQ:A110020 Price to Sales Ratio vs Industry April 3rd 2024

How Has Jeonjinbio Performed Recently?

Recent times have been quite advantageous for Jeonjinbio as its revenue has been rising very briskly. It seems that many are expecting the strong revenue performance to beat most other companies over the coming period, which has increased investors’ willingness to pay up for the stock. If not, then existing shareholders might be a little nervous about the viability of the share price.

Although there are no analyst estimates available for Jeonjinbio, take a look at this free data-rich visualisation to see how the company stacks up on earnings, revenue and cash flow.

Is There Enough Revenue Growth Forecasted For Jeonjinbio?

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

If we review the last year of revenue growth, the company posted a terrific increase of 101%. The latest three year period has also seen an incredible overall rise in revenue, aided by its incredible 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 19% shows it's noticeably more attractive.

In light of this, it's understandable that Jeonjinbio's 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 Jeonjinbio's P/S?

While the price-to-sales ratio shouldn't be the defining factor in whether you buy a stock or not, it's quite a capable barometer of revenue expectations.

We've established that Jeonjinbio maintains its high P/S on the strength of its recent three-year growth being higher than the wider industry forecast, as expected. Right now shareholders are comfortable with the P/S as they are quite confident revenue aren't under threat. If recent medium-term revenue trends continue, it's hard to see the share price falling strongly in the near future under these circumstances.

Plus, you should also learn about these 5 warning signs we've spotted with Jeonjinbio (including 2 which shouldn't be ignored).

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).

Valuation is complex, but we're helping make it simple.

Find out whether Jeonjinbio is potentially over or undervalued by checking out our comprehensive analysis, which includes fair value estimates, risks and warnings, dividends, insider transactions and financial health.

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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.