After Leaping 36% HLB GLOBAL Co., Ltd. (KRX:003580) Shares Are Not Flying Under The Radar

Those holding HLB GLOBAL Co., Ltd. (KRX:003580) shares would be relieved that the share price has rebounded 36% in the last thirty days, but it needs to keep going to repair the recent damage it has caused to investor portfolios. Looking back a bit further, it's encouraging to see the stock is up 36% in the last year.

Since its price has surged higher, you could be forgiven for thinking HLB GLOBAL is a stock to steer clear of with a price-to-sales ratios (or "P/S") of 3.3x, considering almost half the companies in Korea's Basic Materials industry have P/S ratios below 0.4x. However, the P/S might be quite high for a reason and it requires further investigation to determine if it's justified.

Check out our latest analysis for HLB GLOBAL

What Does HLB GLOBAL's P/S Mean For Shareholders?

Recent times have been quite advantageous for HLB GLOBAL 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. You'd really hope so, otherwise you're paying a pretty hefty price for no particular reason.

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 HLB GLOBAL's earnings, revenue and cash flow.

How Is HLB GLOBAL's Revenue Growth Trending?

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

If we review the last year of revenue growth, the company posted a terrific increase of 78%. The latest three year period has also seen an excellent 132% 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.

Weighing the recent medium-term upward revenue trajectory against the broader industry's one-year forecast for contraction of 2.8% shows it's a great look while it lasts.

With this in mind, it's clear to us why HLB GLOBAL's P/S exceeds that of its industry peers. Presumably shareholders aren't keen to offload something they believe will continue to outmanoeuvre the industry. However, its current revenue trajectory will be very difficult to maintain against the headwinds other companies are facing at the moment.

What Does HLB GLOBAL's P/S Mean For Investors?

The strong share price surge has lead to HLB GLOBAL's P/S soaring as well. 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.

We see that HLB GLOBAL justifiably maintains its high P/S on the merits of its recentthree-year revenue growth beating forecasts amidst struggling industry. Right now shareholders are comfortable with the P/S as they are quite confident revenues aren't under threat. We still remain cautious about the company's ability to stay its recent course and swim against the current of the broader industry turmoil. If things remain consistent though, shareholders shouldn't expect any major share price shocks in the near term.

You should always think about risks. Case in point, we've spotted 3 warning signs for HLB GLOBAL you should be aware of, and 2 of them are a bit unpleasant.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com