Revenues Not Telling The Story For Huons Global Co., Ltd. (KOSDAQ:084110) After Shares Rise 26%

Despite an already strong run, Huons Global Co., Ltd. (KOSDAQ:084110) shares have been powering on, with a gain of 26% in the last thirty days. The last 30 days bring the annual gain to a very sharp 88%.

Even after such a large jump in price, it's still not a stretch to say that Huons Global's price-to-sales (or "P/S") ratio of 0.6x right now seems quite "middle-of-the-road" compared to the Pharmaceuticals industry in Korea, where the median P/S ratio is around 0.8x. Although, it's not wise to simply ignore the P/S without explanation as investors may be disregarding a distinct opportunity or a costly mistake.

View our latest analysis for Huons Global

How Huons Global Has Been Performing

Revenue has risen firmly for Huons Global recently, which is pleasing to see. One possibility is that the P/S is moderate because investors think this respectable revenue growth might not be enough to outperform the broader industry in the near future. Those who are bullish on Huons Global will be hoping that this isn't the case, so that they can pick up the stock at a lower valuation.

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

How Is Huons Global's Revenue Growth Trending?

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

Retrospectively, the last year delivered a decent 11% gain to the company's revenues. The latest three year period has also seen an excellent 44% overall rise in revenue, aided somewhat by its short-term performance. Accordingly, shareholders would have definitely welcomed those medium-term rates of revenue growth.

Comparing the recent medium-term revenue trends against the industry's one-year growth forecast of 16% shows it's noticeably less attractive.

With this information, we find it interesting that Huons Global is trading at a fairly similar P/S compared to the industry. It seems most investors are ignoring the fairly limited recent growth rates and are willing to pay up for exposure to the stock. Maintaining these prices will be difficult to achieve as a continuation of recent revenue trends is likely to weigh down the shares eventually.

The Bottom Line On Huons Global's P/S

Huons Global's stock has a lot of momentum behind it lately, which has brought its P/S level with the rest of the industry. While the price-to-sales ratio shouldn't be the defining factor in whether you buy a stock or not, it's quite a capable barometer of revenue expectations.

We've established that Huons Global's average P/S is a bit surprising since its recent three-year growth is lower than the wider industry forecast. Right now we are uncomfortable with the P/S as this revenue performance isn't likely to support a more positive sentiment for long. Unless the recent medium-term conditions improve, it's hard to accept the current share price as fair value.

Before you settle on your opinion, we've discovered 3 warning signs for Huons Global (1 is significant!) that you should be aware of.

If strong companies turning a profit tickle your fancy, then you'll want to check out this free list of interesting companies that trade on a low P/E (but have proven they can grow earnings).

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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.