A Piece Of The Puzzle Missing From Mr. Blue Corporation's (KOSDAQ:207760) 48% Share Price Climb

Mr. Blue Corporation (KOSDAQ:207760) shares have had a really impressive month, gaining 48% after a shaky period beforehand. Unfortunately, the gains of the last month did little to right the losses of the last year with the stock still down 43% over that time.

In spite of the firm bounce in price, there still wouldn't be many who think Mr. Blue's price-to-sales (or "P/S") ratio of 1.7x is worth a mention when the median P/S in Korea's Media industry is similar at about 1.4x. While this might not raise any eyebrows, if the P/S ratio is not justified investors could be missing out on a potential opportunity or ignoring looming disappointment.

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View our latest analysis for Mr. Blue

How Mr. Blue Has Been Performing

As an illustration, revenue has deteriorated at Mr. Blue over the last year, which is not ideal at all. One possibility is that the P/S is moderate because investors think the company might still do enough to be in line with the broader industry in the near future. If not, then existing shareholders may be a little nervous about the viability of the share price.

Want the full picture on earnings, revenue and cash flow for the company? Then our free report on Mr. Blue will help you shine a light on its historical performance.

Is There Some Revenue Growth Forecasted For Mr. Blue?

There's an inherent assumption that a company should be matching the industry for P/S ratios like Mr. Blue's 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 5.1%. This has soured the latest three-year period, which nevertheless managed to deliver a decent 14% overall rise in revenue. Although it's been a bumpy ride, it's still fair to say the revenue growth recently has been mostly respectable for the company.

Comparing that to the industry, which is only predicted to deliver 1.6% growth in the next 12 months, the company's momentum is stronger based on recent medium-term annualised revenue results.

With this information, we find it interesting that Mr. Blue is trading at a fairly similar P/S compared to the industry. It may be that most investors are not convinced the company can maintain its recent growth rates.

What Does Mr. Blue's P/S Mean For Investors?

Mr. Blue's stock has a lot of momentum behind it lately, which has brought its P/S level with the rest of the industry. We'd say the price-to-sales ratio's power isn't primarily as a valuation instrument but rather to gauge current investor sentiment and future expectations.

To our surprise, Mr. Blue revealed its three-year revenue trends aren't contributing to its P/S as much as we would have predicted, given they look better than current industry expectations. There could be some unobserved threats to revenue preventing the P/S ratio from matching this positive performance. While recent revenue trends over the past medium-term suggest that the risk of a price decline is low, investors appear to see the likelihood of revenue fluctuations in the future.

Plus, you should also learn about these 3 warning signs we've spotted with Mr. Blue (including 2 which are significant).

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.