Market Might Still Lack Some Conviction On Com2uS Corporation (KOSDAQ:078340) Even After 25% Share Price Boost

Com2uS Corporation (KOSDAQ:078340) shares have continued their recent momentum with a 25% gain in the last month alone. Longer-term shareholders would be thankful for the recovery in the share price since it's now virtually flat for the year after the recent bounce.

Although its price has surged higher, Com2uS' price-to-sales (or "P/S") ratio of 0.9x might still make it look like a buy right now compared to the Entertainment industry in Korea, where around half of the companies have P/S ratios above 1.7x and even P/S above 4x are quite common. However, the P/S might be low for a reason and it requires further investigation to determine if it's justified.

Check out our latest analysis for Com2uS

How Com2uS Has Been Performing

Com2uS hasn't been tracking well recently as its declining revenue compares poorly to other companies, which have seen some growth in their revenues on average. The P/S ratio is probably low because investors think this poor revenue performance isn't going to get any better. If you still like the company, you'd be hoping this isn't the case so that you could potentially pick up some stock while it's out of favour.

If you'd like to see what analysts are forecasting going forward, you should check out our free report on Com2uS.

Is There Any Revenue Growth Forecasted For Com2uS?

There's an inherent assumption that a company should underperform the industry for P/S ratios like Com2uS' to be considered reasonable.

Taking a look back first, the company's revenue growth last year wasn't something to get excited about as it posted a disappointing decline of 11%. That put a dampener on the good run it was having over the longer-term as its three-year revenue growth is still a noteworthy 28% in total. So we can start by confirming that the company has generally done a good job of growing revenue over that time, even though it had some hiccups along the way.

Turning to the outlook, the next year should generate growth of 15% as estimated by the twelve analysts watching the company. Meanwhile, the rest of the industry is forecast to expand by 15%, which is not materially different.

In light of this, it's peculiar that Com2uS' P/S sits below the majority of other companies. Apparently some shareholders are doubtful of the forecasts and have been accepting lower selling prices.

The Key Takeaway

Com2uS' stock price has surged recently, but its but its P/S still remains modest. It's argued the price-to-sales ratio is an inferior measure of value within certain industries, but it can be a powerful business sentiment indicator.

Our examination of Com2uS' revealed that its P/S remains low despite analyst forecasts of revenue growth matching the wider industry. Despite average revenue growth estimates, there could be some unobserved threats keeping the P/S low. Perhaps investors are concerned that the company could underperform against the forecasts over the near term.

Having said that, be aware Com2uS is showing 1 warning sign in our investment analysis, you should know about.

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.