Revenues Not Telling The Story For Korea Zinc Company, Ltd. (KRX:010130) After Shares Rise 25%

Despite an already strong run, Korea Zinc Company, Ltd. (KRX:010130) shares have been powering on, with a gain of 25% in the last thirty days. Taking a wider view, although not as strong as the last month, the full year gain of 14% is also fairly reasonable.

Since its price has surged higher, you could be forgiven for thinking Korea Zinc Company is a stock not worth researching with a price-to-sales ratios (or "P/S") of 1.7x, considering almost half the companies in Korea's Metals and Mining industry have P/S ratios below 0.3x. 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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View our latest analysis for Korea Zinc Company

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

Korea Zinc Company certainly has been doing a good job lately as it's been growing revenue more than most other companies. The P/S is probably high because investors think this strong revenue performance will continue. If not, then existing shareholders might be a little nervous about the viability of the share price.

Keen to find out how analysts think Korea Zinc Company's future stacks up against the industry? In that case, our free report is a great place to start.

What Are Revenue Growth Metrics Telling Us About The High P/S?

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

If we review the last year of revenue growth, the company posted a terrific increase of 38%. Pleasingly, revenue has also lifted 35% in aggregate from three years ago, thanks to the last 12 months of growth. So we can start by confirming that the company has done a great job of growing revenue over that time.

Looking ahead now, revenue is anticipated to climb by 12% per annum during the coming three years according to the six analysts following the company. That's shaping up to be similar to the 11% per annum growth forecast for the broader industry.

With this information, we find it interesting that Korea Zinc Company is trading at a high P/S compared to the industry. Apparently many investors in the company are more bullish than analysts indicate and aren't willing to let go of their stock right now. Although, additional gains will be difficult to achieve as this level of revenue growth is likely to weigh down the share price eventually.

What Does Korea Zinc Company's P/S Mean For Investors?

Korea Zinc Company's P/S is on the rise since its shares have risen strongly. 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.

Given Korea Zinc Company's future revenue forecasts are in line with the wider industry, the fact that it trades at an elevated P/S is somewhat surprising. The fact that the revenue figures aren't setting the world alight has us doubtful that the company's elevated P/S can be sustainable for the long term. Unless the company can jump ahead of the rest of the industry in the short-term, it'll be a challenge to maintain the share price at current levels.

We don't want to rain on the parade too much, but we did also find 4 warning signs for Korea Zinc Company (3 are significant!) that you need to be mindful of.

If you're unsure about the strength of Korea Zinc Company's business, why not explore our interactive list of stocks with solid business fundamentals for some other companies you may have missed.

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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.