Stock Analysis

JOONGANG ADVANCED MATERIALS Co., Ltd.'s (KOSDAQ:051980) 42% Price Boost Is Out Of Tune With Revenues

KOSDAQ:A051980
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JOONGANG ADVANCED MATERIALS Co., Ltd. (KOSDAQ:051980) shareholders are no doubt pleased to see that the share price has bounced 42% in the last month, although it is still struggling to make up recently lost ground. But the last month did very little to improve the 76% share price decline over the last year.

Since its price has surged higher, you could be forgiven for thinking JOONGANG ADVANCED MATERIALS is a stock to steer clear of with a price-to-sales ratios (or "P/S") of 16.8x, considering almost half the companies in Korea's Communications industry have P/S ratios below 1x. However, the P/S might be quite high for a reason and it requires further investigation to determine if it's justified.

See our latest analysis for JOONGANG ADVANCED MATERIALS

ps-multiple-vs-industry
KOSDAQ:A051980 Price to Sales Ratio vs Industry July 30th 2025
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How Has JOONGANG ADVANCED MATERIALS Performed Recently?

For example, consider that JOONGANG ADVANCED MATERIALS' financial performance has been poor lately as its revenue has been in decline. Perhaps the market believes the company can do enough to outperform the rest of the industry in the near future, which is keeping the P/S ratio high. If not, then existing shareholders may be quite nervous about the viability 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 JOONGANG ADVANCED MATERIALS' earnings, revenue and cash flow.

How Is JOONGANG ADVANCED MATERIALS' Revenue Growth Trending?

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

In reviewing the last year of financials, we were disheartened to see the company's revenues fell to the tune of 28%. That put a dampener on the good run it was having over the longer-term as its three-year revenue growth is still a noteworthy 9.1% in total. Although it's been a bumpy ride, it's still fair to say the revenue growth recently has been mostly respectable for the company.

Comparing the recent medium-term revenue trends against the industry's one-year growth forecast of 33% shows it's noticeably less attractive.

In light of this, it's alarming that JOONGANG ADVANCED MATERIALS' P/S sits above the majority of other companies. It seems most investors are ignoring the fairly limited recent growth rates and are hoping for a turnaround in the company's business prospects. Only the boldest would assume these prices are sustainable as a continuation of recent revenue trends is likely to weigh heavily on the share price eventually.

What We Can Learn From JOONGANG ADVANCED MATERIALS' P/S?

Shares in JOONGANG ADVANCED MATERIALS have seen a strong upwards swing lately, which has really helped boost its P/S figure. We'd say the price-to-sales ratio's power isn't primarily as a valuation instrument but rather to gauge current investor sentiment and future expectations.

The fact that JOONGANG ADVANCED MATERIALS currently trades on a higher P/S relative to the industry is an oddity, since its recent three-year growth is lower than the wider industry forecast. Right now we aren't comfortable with the high P/S as this revenue performance isn't likely to support such positive sentiment for long. If recent medium-term revenue trends continue, it will place shareholders' investments at significant risk and potential investors in danger of paying an excessive premium.

Before you settle on your opinion, we've discovered 2 warning signs for JOONGANG ADVANCED MATERIALS that you should be aware of.

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.

About KOSDAQ:A051980

JOONGANG ADVANCED MATERIALS

Manufactures and sells windows, doors, light emitting diode lightings, medical devices, plastic products, and ventilation flat ducts in the Middle East, Asia, and internationally.

Flawless balance sheet and slightly overvalued.

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