SK Biopharmaceuticals Co., Ltd. (KRX:326030) Stocks Shoot Up 27% But Its P/S Still Looks Reasonable

The SK Biopharmaceuticals Co., Ltd. (KRX:326030) share price has done very well over the last month, posting an excellent gain of 27%. Taking a wider view, although not as strong as the last month, the full year gain of 24% is also fairly reasonable.

Following the firm bounce in price, when almost half of the companies in Korea's Pharmaceuticals industry have price-to-sales ratios (or "P/S") below 0.9x, you may consider SK Biopharmaceuticals as a stock not worth researching with its 16.2x P/S ratio. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the highly elevated P/S.

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Check out our latest analysis for SK Biopharmaceuticals

How Has SK Biopharmaceuticals Performed Recently?

Recent revenue growth for SK Biopharmaceuticals has been in line with the industry. One possibility is that the P/S ratio is high because investors think this modest revenue performance will accelerate. If not, then existing shareholders may be a little nervous about the viability of the share price.

If you'd like to see what analysts are forecasting going forward, you should check out our free report on SK Biopharmaceuticals.

Do Revenue Forecasts Match The High P/S Ratio?

The only time you'd be truly comfortable seeing a P/S as steep as SK Biopharmaceuticals' is when the company's growth is on track to outshine the industry decidedly.

If we review the last year of revenue growth, the company posted a terrific increase of 33%. Pleasingly, revenue has also lifted 78% in aggregate from three years ago, thanks to the last 12 months of growth. Accordingly, shareholders would have definitely welcomed those medium-term rates of revenue growth.

Turning to the outlook, the next year should generate growth of 30% as estimated by the analysts watching the company. That's shaping up to be materially higher than the 18% growth forecast for the broader industry.

In light of this, it's understandable that SK Biopharmaceuticals' P/S sits above the majority of other companies. It seems most investors are expecting this strong future growth and are willing to pay more for the stock.

The Key Takeaway

Shares in SK Biopharmaceuticals have seen a strong upwards swing lately, which has really helped boost its P/S figure. 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 look into SK Biopharmaceuticals shows that its P/S ratio remains high on the merit of its strong future revenues. At this stage investors feel the potential for a deterioration in revenues is quite remote, justifying the elevated P/S ratio. It's hard to see the share price falling strongly in the near future under these circumstances.

You always need to take note of risks, for example - SK Biopharmaceuticals has 1 warning sign we think you should be aware of.

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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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.