BBIA Co., Ltd.'s (KOSDAQ:451250) 25% Cheaper Price Remains In Tune With Revenues

Unfortunately for some shareholders, the BBIA Co., Ltd. (KOSDAQ:451250) share price has dived 25% in the last thirty days, prolonging recent pain. To make matters worse, the recent drop has wiped out a year's worth of gains with the share price now back where it started a year ago.

Although its price has dipped substantially, you could still be forgiven for thinking BBIA is a stock not worth researching with a price-to-sales ratios (or "P/S") of 1.6x, considering almost half the companies in Korea's Chemicals industry have P/S ratios below 0.6x. However, the P/S might be high for a reason and it requires further investigation to determine if it's justified.

View our latest analysis for BBIA

What Does BBIA's Recent Performance Look Like?

With revenue growth that's exceedingly strong of late, BBIA has been doing very well. 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. However, if this isn't the case, investors might get caught out paying too much for the stock.

Although there are no analyst estimates available for BBIA, 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 BBIA?

BBIA's P/S ratio would be typical for a company that's expected to deliver solid growth, and importantly, perform better than the industry.

Taking a look back first, we see that the company grew revenue by an impressive 40% last year. The latest three year period has also seen an excellent 153% 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 11% shows it's noticeably more attractive.

With this in consideration, it's not hard to understand why BBIA'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.

The Final Word

There's still some elevation in BBIA's P/S, even if the same can't be said for its share price recently. Using the price-to-sales ratio alone to determine if you should sell your stock isn't sensible, however it can be a practical guide to the company's future prospects.

It's no surprise that BBIA 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. 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.

And what about other risks? Every company has them, and we've spotted 4 warning signs for BBIA you should know about.

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.