Market Participants Recognise SAMG Entertainment Co., Ltd.'s (KOSDAQ:419530) Revenues Pushing Shares 33% Higher

Despite an already strong run, SAMG Entertainment Co., Ltd. (KOSDAQ:419530) shares have been powering on, with a gain of 33% in the last thirty days. The annual gain comes to 188% following the latest surge, making investors sit up and take notice.

Following the firm bounce in price, when almost half of the companies in Korea's Entertainment industry have price-to-sales ratios (or "P/S") below 1.7x, you may consider SAMG Entertainment as a stock probably not worth researching with its 2.6x P/S ratio. However, the P/S might be high for a reason and it requires further investigation to determine if it's justified.

Our free stock report includes 1 warning sign investors should be aware of before investing in SAMG Entertainment. Read for free now.

View our latest analysis for SAMG Entertainment

What Does SAMG Entertainment's Recent Performance Look Like?

SAMG Entertainment certainly has been doing a good job lately as it's been growing revenue more than most other companies. It seems the market expects this form will continue into the future, hence the elevated P/S ratio. However, if this isn't the case, investors might get caught out paying too much for the stock.

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

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

In order to justify its P/S ratio, SAMG Entertainment would need to produce impressive growth in excess of the industry.

Taking a look back first, we see that the company grew revenue by an impressive 22% last year. Pleasingly, revenue has also lifted 203% in aggregate from three years ago, thanks to the last 12 months of growth. Accordingly, shareholders would have definitely welcomed those medium-term rates of revenue growth.

Looking ahead now, revenue is anticipated to climb by 21% during the coming year according to the two analysts following the company. With the industry only predicted to deliver 15%, the company is positioned for a stronger revenue result.

With this information, we can see why SAMG Entertainment is trading at such a high P/S compared to the industry. It seems most investors are expecting this strong future growth and are willing to pay more for the stock.

The Bottom Line On SAMG Entertainment's P/S

The large bounce in SAMG Entertainment's shares has lifted the company's P/S handsomely. Using the price-to-sales ratio alone to determine if you should sell your stock isn't sensible, however it can be a practical guide to the company's future prospects.

As we suspected, our examination of SAMG Entertainment's analyst forecasts revealed that its superior revenue outlook is contributing to its high P/S. At this stage investors feel the potential for a deterioration in revenues is quite remote, justifying the elevated P/S ratio. It's hard to see the share price falling strongly in the near future under these circumstances.

You always need to take note of risks, for example - SAMG Entertainment has 1 warning sign we think you should be aware of.

If you're unsure about the strength of SAMG Entertainment'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.