Even With A 28% Surge, Cautious Investors Are Not Rewarding Mobidays Inc.'s (KOSDAQ:363260) Performance Completely

Mobidays Inc. (KOSDAQ:363260) shares have had a really impressive month, gaining 28% 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 46% over that time.

In spite of the firm bounce in price, it's still not a stretch to say that Mobidays' price-to-sales (or "P/S") ratio of 1.6x right now seems quite "middle-of-the-road" compared to the Media industry in Korea, where the median P/S ratio is around 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.

View our latest analysis for Mobidays

How Mobidays Has Been Performing

Mobidays certainly has been doing a great job lately as it's been growing its revenue at a really rapid pace. Perhaps the market is expecting future revenue performance to taper off, which has kept the P/S from rising. If you like the company, you'd be hoping this isn't the case so that you could potentially pick up some stock while it's not quite in favour.

Although there are no analyst estimates available for Mobidays, take a look at this free data-rich visualisation to see how the company stacks up on earnings, revenue and cash flow.

Is There Some Revenue Growth Forecasted For Mobidays?

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

Taking a look back first, we see that the company grew revenue by an impressive 114% last year. The latest three year period has also seen an excellent 95% overall rise in revenue, aided by its short-term performance. Therefore, it's fair to say the revenue growth recently has been superb for the company.

This is in contrast to the rest of the industry, which is expected to grow by 1.2% over the next year, materially lower than the company's recent medium-term annualised growth rates.

In light of this, it's curious that Mobidays' P/S sits in line with the majority of other companies. It may be that most investors are not convinced the company can maintain its recent growth rates.

What Does Mobidays' P/S Mean For Investors?

Its shares have lifted substantially and now Mobidays' P/S is back within range of the industry median. Generally, our preference is to limit the use of the price-to-sales ratio to establishing what the market thinks about the overall health of a company.

We've established that Mobidays currently trades on a lower than expected P/S since its recent three-year growth is higher than the wider industry forecast. When we see strong revenue with faster-than-industry growth, we can only assume potential risks are what might be placing pressure on the P/S ratio. At least the risk of a price drop looks to be subdued if recent medium-term revenue trends continue, but investors seem to think future revenue could see some volatility.

Having said that, be aware Mobidays is showing 3 warning signs in our investment analysis, and 2 of those are a bit unpleasant.

If companies with solid past earnings growth is up your alley, you may wish to see this free collection of other companies with strong earnings growth and low P/E ratios.

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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.