Daejoo Electronic Materials Co., Ltd. (KOSDAQ:078600) Looks Just Right With A 29% Price Jump

Despite an already strong run, Daejoo Electronic Materials Co., Ltd. (KOSDAQ:078600) shares have been powering on, with a gain of 29% in the last thirty days. The last 30 days bring the annual gain to a very sharp 30%.

Following the firm bounce in price, given around half the companies in Korea's Electronic industry have price-to-sales ratios (or "P/S") below 1x, you may consider Daejoo Electronic Materials as a stock to avoid entirely with its 9.2x P/S ratio. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's so lofty.

View our latest analysis for Daejoo Electronic Materials

How Has Daejoo Electronic Materials Performed Recently?

With revenue growth that's superior to most other companies of late, Daejoo Electronic Materials has been doing relatively well. It seems the market expects this form will continue into the future, hence the elevated P/S ratio. However, if this isn't the case, investors might get caught out paying too much for the stock.

If you'd like to see what analysts are forecasting going forward, you should check out our free report on Daejoo Electronic Materials.

Is There Enough Revenue Growth Forecasted For Daejoo Electronic Materials?

Daejoo Electronic Materials' P/S ratio would be typical for a company that's expected to deliver very strong growth, and importantly, perform much better than the industry.

If we review the last year of revenue growth, the company posted a worthy increase of 12%. The latest three year period has also seen a 19% overall rise in revenue, aided somewhat by its short-term performance. Accordingly, shareholders would have probably been satisfied with the medium-term rates of revenue growth.

Shifting to the future, estimates from the three analysts covering the company suggest revenue should grow by 54% over the next year. With the industry only predicted to deliver 16%, the company is positioned for a stronger revenue result.

With this information, we can see why Daejoo Electronic Materials 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.

The Key Takeaway

The strong share price surge has lead to Daejoo Electronic Materials' P/S soaring as well. 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've established that Daejoo Electronic Materials maintains its high P/S on the strength of its forecasted revenue growth being higher than the the rest of the Electronic industry, as expected. It appears that shareholders are confident in the company's future revenues, which is propping up the P/S. Unless the analysts have really missed the mark, these strong revenue forecasts should keep the share price buoyant.

Plus, you should also learn about these 3 warning signs we've spotted with Daejoo Electronic Materials (including 2 which are significant).

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.