The Market Lifts BioSmart Co.,Ltd. (KOSDAQ:038460) Shares 33% But It Can Do More

BioSmart Co.,Ltd. (KOSDAQ:038460) shareholders have had their patience rewarded with a 33% share price jump in the last month. Not all shareholders will be feeling jubilant, since the share price is still down a very disappointing 12% in the last twelve months.

Even after such a large jump in price, when close to half the companies operating in Korea's Tech industry have price-to-sales ratios (or "P/S") above 0.8x, you may still consider BioSmartLtd as an enticing stock to check out with its 0.2x P/S ratio. However, the P/S might be low for a reason and it requires further investigation to determine if it's justified.

We've discovered 6 warning signs about BioSmartLtd. View them for free.

Check out our latest analysis for BioSmartLtd

How Has BioSmartLtd Performed Recently?

BioSmartLtd has been doing a decent job lately as it's been growing revenue at a reasonable pace. It might be that many expect the respectable revenue performance to degrade, which has repressed the P/S. If that doesn't eventuate, then existing shareholders may have reason to be optimistic about the future direction of the share price.

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 BioSmartLtd's earnings, revenue and cash flow.

Do Revenue Forecasts Match The Low P/S Ratio?

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

If we review the last year of revenue growth, the company posted a worthy increase of 6.2%. Pleasingly, revenue has also lifted 156% in aggregate from three years ago, partly thanks to the last 12 months of growth. Therefore, it's fair to say the revenue growth recently has been superb for the company.

When compared to the industry's one-year growth forecast of 18%, the most recent medium-term revenue trajectory is noticeably more alluring

With this information, we find it odd that BioSmartLtd is trading at a P/S lower than the industry. It looks like most investors are not convinced the company can maintain its recent growth rates.

The Bottom Line On BioSmartLtd's P/S

BioSmartLtd's stock price has surged recently, but its but its P/S still remains modest. 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.

We're very surprised to see BioSmartLtd currently trading on a much lower than expected P/S since its recent three-year growth is higher than the wider industry forecast. Potential investors that are sceptical over continued revenue performance may be preventing the P/S ratio from matching previous strong performance. It appears many are indeed anticipating revenue instability, because the persistence of these recent medium-term conditions would normally provide a boost to the share price.

Don't forget that there may be other risks. For instance, we've identified 6 warning signs for BioSmartLtd (1 doesn't sit too well with us) you should be aware of.

If you're unsure about the strength of BioSmartLtd's business, why not explore our interactive list of stocks with solid business fundamentals for some other companies you may have missed.

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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.