What Ilyang Pharmaceutical Co.,Ltd's (KRX:007570) 33% Share Price Gain Is Not Telling You

Ilyang Pharmaceutical Co.,Ltd (KRX:007570) shareholders would be excited to see that the share price has had a great month, posting a 33% gain and recovering from prior weakness. The bad news is that even after the stocks recovery in the last 30 days, shareholders are still underwater by about 8.8% over the last year.

Even after such a large jump in price, there still wouldn't be many who think Ilyang PharmaceuticalLtd's price-to-sales (or "P/S") ratio of 0.9x is worth a mention when the median P/S in Korea's Pharmaceuticals industry is similar at about 0.8x. However, investors might be overlooking a clear opportunity or potential setback if there is no rational basis for the P/S.

We've discovered 1 warning sign about Ilyang PharmaceuticalLtd. View them for free.

View our latest analysis for Ilyang PharmaceuticalLtd

How Ilyang PharmaceuticalLtd Has Been Performing

For example, consider that Ilyang PharmaceuticalLtd's financial performance has been pretty ordinary lately as revenue growth is non-existent. 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 not, then existing shareholders may be feeling hopeful about the future direction of the share price.

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.

How Is Ilyang PharmaceuticalLtd's Revenue Growth Trending?

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

Taking a look back first, we see that there was hardly any revenue growth to speak of for the company over the past year. Fortunately, a few good years before that means that it was still able to grow revenue by 11% in total over the last three years. So it appears to us that the company has had a mixed result in terms of growing revenue over that time.

This is in contrast to the rest of the industry, which is expected to grow by 16% over the next year, materially higher than the company's recent medium-term annualised growth rates.

With this in mind, we find it intriguing that Ilyang PharmaceuticalLtd's P/S is comparable to that of its industry peers. 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?

Ilyang PharmaceuticalLtd'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 Ilyang PharmaceuticalLtd'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. If recent medium-term revenue trends continue, the probability of a share price decline will become quite substantial, placing shareholders at risk.

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

If you're unsure about the strength of Ilyang PharmaceuticalLtd'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.