Vivozon Pharmaceutical Co., Ltd.'s (KOSDAQ:082800) Shares Climb 35% But Its Business Is Yet to Catch Up

The Vivozon Pharmaceutical Co., Ltd. (KOSDAQ:082800) share price has done very well over the last month, posting an excellent gain of 35%. Looking back a bit further, it's encouraging to see the stock is up 63% in the last year.

After such a large jump in price, given close to half the companies operating in Korea's Semiconductor industry have price-to-sales ratios (or "P/S") below 1.3x, you may consider Vivozon Pharmaceutical as a stock to potentially avoid with its 3.2x P/S ratio. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the elevated P/S.

Check out our latest analysis for Vivozon Pharmaceutical

How Has Vivozon Pharmaceutical Performed Recently?

With revenue growth that's exceedingly strong of late, Vivozon Pharmaceutical has been doing very well. The P/S ratio is probably high because investors think this strong revenue growth will be enough to outperform the broader industry in the near future. You'd really hope so, otherwise you're paying a pretty hefty price for no particular reason.

We don't have analyst forecasts, but you can see how recent trends are setting up the company for the future by checking out our free report on Vivozon Pharmaceutical's earnings, revenue and cash flow.

Is There Enough Revenue Growth Forecasted For Vivozon Pharmaceutical?

Vivozon Pharmaceutical's P/S ratio would be typical for a company that's expected to deliver solid growth, and importantly, perform better than the industry.

If we review the last year of revenue growth, the company posted a terrific increase of 37%. The strong recent performance means it was also able to grow revenue by 59% in total over the last three years. Therefore, it's fair to say the revenue growth recently has been superb for the company.

Comparing the recent medium-term revenue trends against the industry's one-year growth forecast of 63% shows it's noticeably less attractive.

With this in mind, we find it worrying that Vivozon Pharmaceutical's P/S exceeds that of its industry peers. Apparently many investors in the company are way more bullish than recent times would indicate and aren't willing to let go of their stock at any price. Only the boldest would assume these prices are sustainable as a continuation of recent revenue trends is likely to weigh heavily on the share price eventually.

What We Can Learn From Vivozon Pharmaceutical's P/S?

Vivozon Pharmaceutical shares have taken a big step in a northerly direction, but its P/S is elevated as a result. 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.

Our examination of Vivozon Pharmaceutical revealed its poor three-year revenue trends aren't detracting from the P/S as much as we though, given they look worse than current industry expectations. When we observe slower-than-industry revenue growth alongside a high P/S ratio, we assume there to be a significant risk of the share price decreasing, which would result in a lower P/S ratio. Unless the recent medium-term conditions improve markedly, it's very challenging to accept these the share price as being reasonable.

And what about other risks? Every company has them, and we've spotted 1 warning sign for Vivozon Pharmaceutical you should know about.

If strong companies turning a profit tickle your fancy, then you'll want to check out this free list of interesting companies that trade on a low P/E (but have proven they can grow earnings).

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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.