Slammed 27% Mobidays Inc. (KOSDAQ:363260) Screens Well Here But There Might Be A Catch

Mobidays Inc. (KOSDAQ:363260) shares have had a horrible month, losing 27% after a relatively good period beforehand. The drop over the last 30 days has capped off a tough year for shareholders, with the share price down 37% in that time.

Even after such a large drop in price, you could still be forgiven for feeling indifferent about Mobidays' P/S ratio of 1.6x, since the median price-to-sales (or "P/S") ratio for the Media industry in Korea is also close to 1.4x. However, investors might be overlooking a clear opportunity or potential setback if there is no rational basis for the P/S.

See our latest analysis for Mobidays

How Has Mobidays Performed Recently?

Mobidays certainly has been doing a great job lately as it's been growing its revenue at a really rapid pace. It might be that many expect the strong revenue performance to wane, which has kept the share price, and thus the P/S ratio, 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.

We don't have analyst forecasts, but you can see how recent trends are setting up the company for the future by checking out our free report on Mobidays' earnings, revenue and cash flow.

How Is Mobidays' Revenue Growth Trending?

The only time you'd be comfortable seeing a P/S like Mobidays' is when the company's growth is tracking the industry closely.

If we review the last year of revenue growth, the company posted a terrific increase of 129%. The latest three year period has also seen an excellent 82% overall rise in revenue, aided by its short-term performance. Accordingly, shareholders would have definitely welcomed those medium-term rates of revenue growth.

This is in contrast to the rest of the industry, which is expected to grow by 2.1% 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. Apparently some shareholders believe the recent performance is at its limits and have been accepting lower selling prices.

What We Can Learn From Mobidays' P/S?

Following Mobidays' share price tumble, its P/S is just clinging on to the industry median P/S. 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.

To our surprise, Mobidays 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. 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.

Before you settle on your opinion, we've discovered 3 warning signs for Mobidays (2 are concerning!) that you should be aware of.

If these risks are making you reconsider your opinion on Mobidays, explore our interactive list of high quality stocks to get an idea of what else is out there.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.