Investors Appear Satisfied With Korea Zinc Company, Ltd.'s (KRX:010130) Prospects As Shares Rocket 30%

Korea Zinc Company, Ltd. (KRX:010130) shareholders would be excited to see that the share price has had a great month, posting a 30% gain and recovering from prior weakness. Looking back a bit further, it's encouraging to see the stock is up 71% in the last year.

Since its price has surged higher, when almost half of the companies in Korea's Metals and Mining industry have price-to-sales ratios (or "P/S") below 0.3x, you may consider Korea Zinc Company as a stock probably not worth researching with its 1.3x P/S ratio. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the elevated P/S.

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Check out our latest analysis for Korea Zinc Company

What Does Korea Zinc Company's Recent Performance Look Like?

With revenue growth that's superior to most other companies of late, Korea Zinc Company has been doing relatively well. It seems the market expects this form will continue into the future, hence the elevated P/S ratio. However, if this isn't the case, investors might get caught out paying too much for the stock.

Want the full picture on analyst estimates for the company? Then our free report on Korea Zinc Company will help you uncover what's on the horizon.

Do Revenue Forecasts Match The High P/S Ratio?

In order to justify its P/S ratio, Korea Zinc Company would need to produce impressive growth in excess of the industry.

If we review the last year of revenue growth, the company posted a terrific increase of 24%. The latest three year period has also seen a 21% overall rise in revenue, aided extensively by its short-term performance. Accordingly, shareholders would have probably been satisfied with the medium-term rates of revenue growth.

Looking ahead now, revenue is anticipated to climb by 10% per year during the coming three years according to the seven analysts following the company. With the industry only predicted to deliver 8.1% per year, the company is positioned for a stronger revenue result.

With this information, we can see why Korea Zinc Company is trading at such a high P/S compared to the industry. It seems most investors are expecting this strong future growth and are willing to pay more for the stock.

The Final Word

The large bounce in Korea Zinc Company's shares has lifted the company's P/S handsomely. 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.

We've established that Korea Zinc Company maintains its high P/S on the strength of its forecasted revenue growth being higher than the the rest of the Metals and Mining industry, as expected. It appears that shareholders are confident in the company's future revenues, which is propping up the P/S. Unless these conditions change, they will continue to provide strong support to the share price.

Before you settle on your opinion, we've discovered 4 warning signs for Korea Zinc Company (1 can't be ignored!) that you should be aware of.

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.