Market Still Lacking Some Conviction On BNC Korea Co., Ltd. (KOSDAQ:256840)

With a price-to-sales (or "P/S") ratio of 2.7x BNC Korea Co., Ltd. (KOSDAQ:256840) may be sending very bullish signals at the moment, given that almost half of all the Biotechs companies in Korea have P/S ratios greater than 10.1x and even P/S higher than 42x are not unusual. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the highly reduced P/S.

View our latest analysis for BNC Korea

What Does BNC Korea's Recent Performance Look Like?

Revenue has risen firmly for BNC Korea recently, which is pleasing to see. It might be that many expect the respectable revenue performance to degrade substantially, which has repressed the P/S. Those who are bullish on BNC Korea will be hoping that this isn't the case, so that they can pick up the stock at a lower valuation.

Want the full picture on earnings, revenue and cash flow for the company? Then our free report on BNC Korea will help you shine a light on its historical performance.

How Is BNC Korea's Revenue Growth Trending?

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

Taking a look back first, we see that the company grew revenue by an impressive 16% last year. The strong recent performance means it was also able to grow revenue by 244% in total over the last three years. So we can start by confirming that the company has done a great job of growing revenue over that time.

Comparing that to the industry, which is only predicted to deliver 46% growth in the next 12 months, the company's momentum is stronger based on recent medium-term annualised revenue results.

In light of this, it's peculiar that BNC Korea's P/S sits below the majority of other companies. Apparently some shareholders believe the recent performance has exceeded its limits and have been accepting significantly lower selling prices.

The Final Word

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're very surprised to see BNC Korea currently trading on a much lower than expected P/S since its recent three-year growth is higher than the wider industry forecast. When we see robust revenue growth that outpaces the industry, we presume that there are notable underlying risks to the company's future performance, which is exerting downward pressure on the P/S ratio. While recent revenue trends over the past medium-term suggest that the risk of a price decline is low, investors appear to perceive a likelihood of revenue fluctuations in the future.

There are also other vital risk factors to consider before investing and we've discovered 1 warning sign for BNC Korea that you should be aware of.

If you're unsure about the strength of BNC Korea'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.