Finger, Inc. (KOSDAQ:163730) Looks Just Right With A 28% Price Jump

Despite an already strong run, Finger, Inc. (KOSDAQ:163730) shares have been powering on, with a gain of 28% in the last thirty days. Looking back a bit further, it's encouraging to see the stock is up 93% in the last year.

After such a large jump in price, you could be forgiven for thinking Finger is a stock not worth researching with a price-to-sales ratios (or "P/S") of 1.7x, considering almost half the companies in Korea's IT industry have P/S ratios below 1.1x. However, the P/S might be high for a reason and it requires further investigation to determine if it's justified.

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Check out our latest analysis for Finger

How Has Finger Performed Recently?

While the industry has experienced revenue growth lately, Finger's revenue has gone into reverse gear, which is not great. Perhaps the market is expecting the poor revenue to reverse, justifying it's current high P/S.. However, if this isn't the case, investors might get caught out paying too much for the stock.

Keen to find out how analysts think Finger's future stacks up against the industry? In that case, our free report is a great place to start.

How Is Finger's Revenue Growth Trending?

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

Retrospectively, the last year delivered a frustrating 1.7% decrease to the company's top line. The last three years don't look nice either as the company has shrunk revenue by 26% in aggregate. Therefore, it's fair to say the revenue growth recently has been undesirable for the company.

Looking ahead now, revenue is anticipated to climb by 41% during the coming year according to the only analyst following the company. That's shaping up to be materially higher than the 4.2% growth forecast for the broader industry.

With this information, we can see why Finger is trading at such a high P/S compared to the industry. It seems most investors are expecting this strong future growth and are willing to pay more for the stock.

What We Can Learn From Finger's P/S?

The large bounce in Finger's shares has lifted the company's P/S handsomely. 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.

As we suspected, our examination of Finger's analyst forecasts revealed that its superior revenue outlook is contributing to its high P/S. Right now shareholders are comfortable with the P/S as they are quite confident future revenues aren't under threat. It's hard to see the share price falling strongly in the near future under these circumstances.

And what about other risks? Every company has them, and we've spotted 5 warning signs for Finger (of which 1 is a bit unpleasant!) you should know about.

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.