WOOJUNG BIO, Inc.'s (KOSDAQ:215380) Shares Bounce 43% But Its Business Still Trails The Industry

WOOJUNG BIO, Inc. (KOSDAQ:215380) shareholders have had their patience rewarded with a 43% share price jump in the last month. Not all shareholders will be feeling jubilant, since the share price is still down a very disappointing 20% in the last twelve months.

Even after such a large jump in price, WOOJUNG BIO's price-to-sales (or "P/S") ratio of 0.8x might still make it look like a strong buy right now compared to the wider Life Sciences industry in Korea, where around half of the companies have P/S ratios above 4.3x and even P/S above 13x are quite common. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's so limited.

See our latest analysis for WOOJUNG BIO

How WOOJUNG BIO Has Been Performing

For instance, WOOJUNG BIO's receding revenue in recent times would have to be some food for thought. It might be that many expect the disappointing revenue performance to continue or accelerate, which has repressed the P/S. However, if this doesn't eventuate then existing shareholders may be feeling optimistic about the future direction of the share price.

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

Do Revenue Forecasts Match The Low P/S Ratio?

The only time you'd be truly comfortable seeing a P/S as depressed as WOOJUNG BIO's is when the company's growth is on track to lag the industry decidedly.

In reviewing the last year of financials, we were disheartened to see the company's revenues fell to the tune of 2.7%. Regardless, revenue has managed to lift by a handy 28% in aggregate from three years ago, thanks to the earlier period of growth. Accordingly, while they would have preferred to keep the run going, shareholders would be roughly satisfied with the medium-term rates of revenue growth.

Comparing the recent medium-term revenue trends against the industry's one-year growth forecast of 19% shows it's noticeably less attractive.

With this in consideration, it's easy to understand why WOOJUNG BIO's P/S falls short of the mark set by its industry peers. Apparently many shareholders weren't comfortable holding on to something they believe will continue to trail the wider industry.

What We Can Learn From WOOJUNG BIO's P/S?

Even after such a strong price move, WOOJUNG BIO's P/S still trails the rest of the industry. 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.

In line with expectations, WOOJUNG BIO maintains its low P/S on the weakness of its recent three-year growth being lower than the wider industry forecast. At this stage investors feel the potential for an improvement in revenue isn't great enough to justify a higher P/S ratio. If recent medium-term revenue trends continue, it's hard to see the share price experience a reversal of fortunes anytime soon.

Plus, you should also learn about these 5 warning signs we've spotted with WOOJUNG BIO (including 3 which are potentially serious).

Of course, profitable companies with a history of great earnings growth are generally safer bets. So you may wish to see this free collection of other companies that have reasonable P/E ratios and have grown earnings strongly.

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