SK Biopharmaceuticals Co., Ltd. (KRX:326030) Looks Just Right With A 25% Price Jump

The SK Biopharmaceuticals Co., Ltd. (KRX:326030) share price has done very well over the last month, posting an excellent gain of 25%. The last 30 days bring the annual gain to a very sharp 25%.

Since its price has surged higher, you could be forgiven for thinking SK Biopharmaceuticals is a stock to steer clear of with a price-to-sales ratios (or "P/S") of 18x, considering almost half the companies in Korea's Pharmaceuticals industry have P/S ratios below 0.9x. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's so lofty.

See our latest analysis for SK Biopharmaceuticals

What Does SK Biopharmaceuticals' P/S Mean For Shareholders?

SK Biopharmaceuticals certainly has been doing a good job lately as it's been growing revenue more than most other companies. It seems that many are expecting the strong revenue performance to persist, which has raised the P/S. If not, then existing shareholders might be a little nervous about the viability of the share price.

Want the full picture on analyst estimates for the company? Then our free report on SK Biopharmaceuticals will help you uncover what's on the horizon.

Is There Enough Revenue Growth Forecasted For SK Biopharmaceuticals?

SK Biopharmaceuticals' P/S ratio would be typical for a company that's expected to deliver very strong growth, and importantly, perform much better than the industry.

Taking a look back first, we see that the company grew revenue by an impressive 61% last year. The strong recent performance means it was also able to grow revenue by 153% in total over the last three years. Therefore, it's fair to say the revenue growth recently has been superb for the company.

Looking ahead now, revenue is anticipated to climb by 27% per annum during the coming three years according to the analysts following the company. Meanwhile, the rest of the industry is forecast to only expand by 23% each year, which is noticeably less attractive.

With this information, we can see why SK Biopharmaceuticals is trading at such a high P/S compared to the industry. It seems most investors are expecting this strong future growth and are willing to pay more for the stock.

The Final Word

The strong share price surge has lead to SK Biopharmaceuticals' P/S soaring as well. 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.

As we suspected, our examination of SK Biopharmaceuticals' analyst forecasts revealed that its superior revenue outlook is contributing to its high P/S. Right now shareholders are comfortable with the P/S as they are quite confident future revenues aren't under threat. It's hard to see the share price falling strongly in the near future under these circumstances.

Many other vital risk factors can be found on the company's balance sheet. Our free balance sheet analysis for SK Biopharmaceuticals with six simple checks will allow you to discover any risks that could be an issue.

If you're unsure about the strength of SK Biopharmaceuticals' 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.