Revenues Tell The Story For RFHIC Corporation (KOSDAQ:218410) As Its Stock Soars 25%

Despite an already strong run, RFHIC Corporation (KOSDAQ:218410) shares have been powering on, with a gain of 25% in the last thirty days. The last month tops off a massive increase of 104% in the last year.

Since its price has surged higher, you could be forgiven for thinking RFHIC is a stock to steer clear of with a price-to-sales ratios (or "P/S") of 6x, considering almost half the companies in Korea's Semiconductor industry have P/S ratios below 1.5x. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the highly elevated P/S.

Trump has pledged to "unleash" American oil and gas and these 15 US stocks have developments that are poised to benefit.

View our latest analysis for RFHIC

How Has RFHIC Performed Recently?

Recent times haven't been great for RFHIC as its revenue has been rising slower than most other companies. One possibility is that the P/S ratio is high because investors think this lacklustre revenue performance will improve markedly. You'd really hope so, otherwise you're paying a pretty hefty price for no particular reason.

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

Is There Enough Revenue Growth Forecasted For RFHIC?

In order to justify its P/S ratio, RFHIC would need to produce outstanding growth that's well in excess of the industry.

If we review the last year of revenue growth, the company posted a worthy increase of 14%. The latest three year period has also seen a 17% overall rise in revenue, aided somewhat by its short-term performance. So we can start by confirming that the company has actually done a good job of growing revenue over that time.

Turning to the outlook, the next year should generate growth of 38% as estimated by the sole analyst watching the company. Meanwhile, the rest of the industry is forecast to only expand by 26%, which is noticeably less attractive.

With this in mind, it's not hard to understand why RFHIC's P/S is high relative to its industry peers. It seems most investors are expecting this strong future growth and are willing to pay more for the stock.

What Does RFHIC's P/S Mean For Investors?

The strong share price surge has lead to RFHIC's P/S soaring as well. 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 RFHIC shows that its P/S ratio remains high on the merit of its strong future revenues. Right now shareholders are comfortable with the P/S as they are quite confident future revenues aren't under threat. Unless these conditions change, they will continue to provide strong support to the share price.

You should always think about risks. Case in point, we've spotted 2 warning signs for RFHIC 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.