FLITTO Inc.'s (KOSDAQ:300080) P/S Is Still On The Mark Following 42% Share Price Bounce

The FLITTO Inc. (KOSDAQ:300080) share price has done very well over the last month, posting an excellent gain of 42%. The annual gain comes to 186% following the latest surge, making investors sit up and take notice.

After such a large jump in price, given around half the companies in Korea's Software industry have price-to-sales ratios (or "P/S") below 1.9x, you may consider FLITTO as a stock to avoid entirely with its 9x P/S ratio. However, the P/S might be quite high for a reason and it requires further investigation to determine if it's justified.

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View our latest analysis for FLITTO

What Does FLITTO's Recent Performance Look Like?

FLITTO certainly has been doing a great job lately as it's been growing its revenue at a really rapid pace. 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 FLITTO's earnings, revenue and cash flow.

How Is FLITTO's Revenue Growth Trending?

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

Retrospectively, the last year delivered an exceptional 42% gain to the company's top line. The latest three year period has also seen an excellent 136% overall rise in revenue, aided by its short-term performance. Therefore, it's fair to say the revenue growth recently has been superb for the company.

Comparing that to the industry, which is only predicted to deliver 14% growth in the next 12 months, the company's momentum is stronger based on recent medium-term annualised revenue results.

In light of this, it's understandable that FLITTO's P/S sits above the majority of other companies. Presumably shareholders aren't keen to offload something they believe will continue to outmanoeuvre the wider industry.

The Bottom Line On FLITTO's P/S

Shares in FLITTO 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's no surprise that FLITTO can support its high P/S given the strong revenue growth its experienced over the last three-year is superior to the current industry outlook. In the eyes of shareholders, the probability of a continued growth trajectory is great enough to prevent the P/S from pulling back. If recent medium-term revenue trends continue, it's hard to see the share price falling strongly in the near future under these circumstances.

Plus, you should also learn about these 2 warning signs we've spotted with FLITTO (including 1 which is significant).

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.

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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.