FNS TECH. Co., Ltd (KOSDAQ:083500) Stock Rockets 25% As Investors Are Less Pessimistic Than Expected

FNS TECH. Co., Ltd (KOSDAQ:083500) shareholders would be excited to see that the share price has had a great month, posting a 25% gain and recovering from prior weakness. But the gains over the last month weren't enough to make shareholders whole, as the share price is still down 7.2% in the last twelve months.

Although its price has surged higher, you could still be forgiven for feeling indifferent about FNS TECH's P/S ratio of 1.4x, since the median price-to-sales (or "P/S") ratio for the Semiconductor industry in Korea is also close to 1.3x. While this might not raise any eyebrows, if the P/S ratio is not justified investors could be missing out on a potential opportunity or ignoring looming disappointment.

View our latest analysis for FNS TECH

What Does FNS TECH's Recent Performance Look Like?

FNS TECH certainly has been doing a great job lately as it's been growing its revenue at a really rapid pace. Perhaps the market is expecting future revenue performance to taper off, which has kept the P/S from rising. Those who are bullish on FNS TECH will be hoping that this isn't the case, so that they can pick up the stock at a lower valuation.

Although there are no analyst estimates available for FNS TECH, take a look at this free data-rich visualisation to see how the company stacks up on earnings, revenue and cash flow.

Is There Some Revenue Growth Forecasted For FNS TECH?

The only time you'd be comfortable seeing a P/S like FNS TECH's is when the company's growth is tracking the industry closely.

Taking a look back first, we see that the company grew revenue by an impressive 59% last year. Despite this strong recent growth, it's still struggling to catch up as its three-year revenue frustratingly shrank by 29% overall. So unfortunately, we have to acknowledge that the company has not done a great job of growing revenues over that time.

In contrast to the company, the rest of the industry is expected to grow by 44% over the next year, which really puts the company's recent medium-term revenue decline into perspective.

With this in mind, we find it worrying that FNS TECH's P/S exceeds that of its industry peers. It seems most investors are ignoring the recent poor growth rate and are hoping for a turnaround in the company's business prospects. Only the boldest would assume these prices are sustainable as a continuation of recent revenue trends is likely to weigh on the share price eventually.

The Bottom Line On FNS TECH's P/S

FNS TECH appears to be back in favour with a solid price jump bringing its P/S back in line with other companies in the industry Generally, our preference is to limit the use of the price-to-sales ratio to establishing what the market thinks about the overall health of a company.

Our look at FNS TECH revealed its shrinking revenues over the medium-term haven't impacted the P/S as much as we anticipated, given the industry is set to grow. Even though it matches the industry, we're uncomfortable with the current P/S ratio, as this dismal revenue performance is unlikely to support a more positive sentiment for long. Unless the recent medium-term conditions improve markedly, investors will have a hard time accepting the share price as fair value.

It is also worth noting that we have found 3 warning signs for FNS TECH (2 are a bit concerning!) that you need to take into consideration.

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.