JUSUNG ENGINEERING Co.,Ltd. (KOSDAQ:036930) Stock Rockets 25% As Investors Are Less Pessimistic Than Expected

JUSUNG ENGINEERING Co.,Ltd. (KOSDAQ:036930) shares have had a really impressive month, gaining 25% after a shaky period beforehand. The last month tops off a massive increase of 224% in the last year.

After such a large jump in price, given around half the companies in Korea's Semiconductor industry have price-to-sales ratios (or "P/S") below 1.9x, you may consider JUSUNG ENGINEERINGLtd as a stock to avoid entirely with its 6x 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.

View our latest analysis for JUSUNG ENGINEERINGLtd

What Does JUSUNG ENGINEERINGLtd's Recent Performance Look Like?

Recent times haven't been great for JUSUNG ENGINEERINGLtd as its revenue has been falling quicker than most other companies. One possibility is that the P/S ratio is high because investors think the company will turn things around completely and accelerate past most others in the industry. If not, then existing shareholders may be very nervous about the viability of the share price.

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

Is There Enough Revenue Growth Forecasted For JUSUNG ENGINEERINGLtd?

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

Retrospectively, the last year delivered a frustrating 38% decrease to the company's top line. However, a few very strong years before that means that it was still able to grow revenue by an impressive 103% in total over the last three years. So we can start by confirming that the company has generally done a very good job of growing revenue over that time, even though it had some hiccups along the way.

Turning to the outlook, the next three years should generate growth of 15% per year as estimated by the four analysts watching the company. That's shaping up to be materially lower than the 35% each year growth forecast for the broader industry.

With this in consideration, we believe it doesn't make sense that JUSUNG ENGINEERINGLtd's P/S is outpacing its industry peers. Apparently many investors in the company are way more bullish than analysts indicate and aren't willing to let go of their stock at any price. There's a good chance these shareholders are setting themselves up for future disappointment if the P/S falls to levels more in line with the growth outlook.

What Does JUSUNG ENGINEERINGLtd's P/S Mean For Investors?

Shares in JUSUNG ENGINEERINGLtd have seen a strong upwards swing lately, which has really helped boost its P/S figure. 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.

It comes as a surprise to see JUSUNG ENGINEERINGLtd trade at such a high P/S given the revenue forecasts look less than stellar. When we see a weak revenue outlook, we suspect the share price faces a much greater risk of declining, bringing back down the P/S figures. At these price levels, investors should remain cautious, particularly if things don't improve.

We don't want to rain on the parade too much, but we did also find 2 warning signs for JUSUNG ENGINEERINGLtd that you need to be mindful of.

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.