Woori Technology, Inc.'s (KOSDAQ:032820) 90% Share Price Surge Not Quite Adding Up

Woori Technology, Inc. (KOSDAQ:032820) shares have continued their recent momentum with a 90% gain in the last month alone. Looking back a bit further, it's encouraging to see the stock is up 84% in the last year.

Since its price has surged higher, when almost half of the companies in Korea's Electronic industry have price-to-sales ratios (or "P/S") below 0.7x, you may consider Woori Technology as a stock not worth researching with its 9.2x 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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See our latest analysis for Woori Technology

What Does Woori Technology's Recent Performance Look Like?

Woori Technology has been doing a good job lately as it's been growing revenue at a solid pace. Perhaps the market is expecting this decent revenue performance to beat out the industry over the near term, which has kept the P/S propped up. However, if this isn't the case, investors might get caught out paying too much for the stock.

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 Woori Technology's earnings, revenue and cash flow.

Is There Enough Revenue Growth Forecasted For Woori Technology?

There's an inherent assumption that a company should far outperform the industry for P/S ratios like Woori Technology's to be considered reasonable.

Retrospectively, the last year delivered a decent 8.9% gain to the company's revenues. The latest three year period has also seen an excellent 47% overall rise in revenue, aided somewhat 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 predicted to deliver 15% growth in the next 12 months, the company's momentum is pretty similar based on recent medium-term annualised revenue results.

With this in mind, we find it intriguing that Woori Technology's P/S exceeds that of its industry peers. Apparently many investors in the company are more bullish than recent times would indicate and aren't willing to let go of their stock right now. Although, additional gains will be difficult to achieve as a continuation of recent revenue trends would weigh down the share price eventually.

What Does Woori Technology's P/S Mean For Investors?

Woori Technology's P/S has grown nicely over the last month thanks to a handy boost in the share price. 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.

We didn't expect to see Woori Technology trade at such a high P/S considering its last three-year revenue growth has only been on par with the rest of the industry. When we see average revenue with industry-like growth combined with a high P/S, we suspect the share price is at risk of declining, bringing the P/S back in line with the industry too. If recent medium-term revenue trends continue, it will place shareholders' investments at risk and potential investors in danger of paying an unnecessary premium.

Don't forget that there may be other risks. For instance, we've identified 1 warning sign for Woori Technology that you should be aware of.

If these risks are making you reconsider your opinion on Woori Technology, explore our interactive list of high quality stocks to get an idea of what else is out there.

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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.