Ilyang Pharmaceutical Co.,Ltd's (KRX:007570) 28% Price Boost Is Out Of Tune With Revenues

Ilyang Pharmaceutical Co.,Ltd (KRX:007570) shares have had a really impressive month, gaining 28% after a shaky period beforehand. Not all shareholders will be feeling jubilant, since the share price is still down a very disappointing 12% in the last twelve months.

In spite of the firm bounce in price, it's still not a stretch to say that Ilyang PharmaceuticalLtd's price-to-sales (or "P/S") ratio of 0.7x 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. However, investors might be overlooking a clear opportunity or potential setback if there is no rational basis for the P/S.

See our latest analysis for Ilyang PharmaceuticalLtd

How Ilyang PharmaceuticalLtd Has Been Performing

We'd have to say that with no tangible growth over the last year, Ilyang PharmaceuticalLtd's revenue has been unimpressive. Perhaps the market believes the recent run-of-the-mill revenue performance isn't enough to outperform the industry, which has kept the P/S muted. If you like the company, you'd be hoping this isn't the case so that you could potentially pick up some stock while it's not quite in favour.

Although there are no analyst estimates available for Ilyang PharmaceuticalLtd, 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 P/S Ratio?

Ilyang PharmaceuticalLtd's P/S ratio would be typical for a company that's only expected to deliver moderate growth, and importantly, perform in line with the industry.

Retrospectively, the last year delivered virtually the same number to the company's top line as the year before. Likewise, not much has changed from three years ago as revenue have been stuck during that whole time. So it seems apparent to us that the company has struggled to grow revenue meaningfully over that time.

Comparing that to the industry, which is predicted to deliver 16% growth in the next 12 months, the company's momentum is weaker, based on recent medium-term annualised revenue results.

In light of this, it's curious that Ilyang PharmaceuticalLtd's P/S sits in line with the majority of other companies. Apparently many investors in the company are less bearish than recent times would indicate and aren't willing to let go of their stock right now. They may be setting themselves up for future disappointment if the P/S falls to levels more in line with recent growth rates.

What Does Ilyang PharmaceuticalLtd's P/S Mean For Investors?

Its shares have lifted substantially and now Ilyang PharmaceuticalLtd's P/S is back within range of the industry median. 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.

Our examination of Ilyang PharmaceuticalLtd revealed its poor three-year revenue trends aren't resulting in a lower P/S as per our expectations, given they look worse than current industry outlook. Right now we are uncomfortable with the P/S as this revenue performance isn't likely to support a more positive sentiment for long. If recent medium-term revenue trends continue, the probability of a share price decline will become quite substantial, placing shareholders at risk.

Having said that, be aware Ilyang PharmaceuticalLtd is showing 1 warning sign in our investment analysis, 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.