What You Can Learn From BINEX Co., Ltd.'s (KOSDAQ:053030) P/S After Its 25% Share Price Crash

BINEX Co., Ltd. (KOSDAQ:053030) shares have had a horrible month, losing 25% after a relatively good period beforehand. Looking at the bigger picture, even after this poor month the stock is up 52% in the last year.

In spite of the heavy fall in price, you could still be forgiven for thinking BINEX is a stock to steer clear of with a price-to-sales ratios (or "P/S") of 4.1x, considering almost half the companies in Korea's Pharmaceuticals industry have P/S ratios below 0.7x. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the highly elevated P/S.

Check out our latest analysis for BINEX

How Has BINEX Performed Recently?

While the industry has experienced revenue growth lately, BINEX's revenue has gone into reverse gear, which is not great. One possibility is that the P/S ratio is high because investors think this poor revenue performance will turn the corner. However, if this isn't the case, investors might get caught out paying too much for the stock.

Want the full picture on analyst estimates for the company? Then our free report on BINEX will help you uncover what's on the horizon.

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

The only time you'd be truly comfortable seeing a P/S as steep as BINEX's is when the company's growth is on track to outshine the industry decidedly.

Retrospectively, the last year delivered a frustrating 19% decrease to the company's top line. At least revenue has managed not to go completely backwards from three years ago in aggregate, thanks to the earlier period of growth. Accordingly, shareholders probably wouldn't have been overly satisfied with the unstable medium-term growth rates.

Turning to the outlook, the next year should generate growth of 32% as estimated by the three analysts watching the company. That's shaping up to be materially higher than the 17% growth forecast for the broader industry.

With this information, we can see why BINEX is trading at such a high P/S compared to the industry. Apparently shareholders aren't keen to offload something that is potentially eyeing a more prosperous future.

What We Can Learn From BINEX's P/S?

BINEX's shares may have suffered, but its P/S remains high. Typically, we'd caution against reading too much into price-to-sales ratios when settling on investment decisions, though it can reveal plenty about what other market participants think about the company.

Our look into BINEX shows that its P/S ratio remains high on the merit of its strong future revenues. It appears that shareholders are confident in the company's future revenues, which is propping up the P/S. Unless these conditions change, they will continue to provide strong support to the share price.

And what about other risks? Every company has them, and we've spotted 1 warning sign for BINEX you should know about.

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.