Investors Appear Satisfied With ROBOTIS Co., Ltd.'s (KOSDAQ:108490) Prospects As Shares Rocket 33%

The ROBOTIS Co., Ltd. (KOSDAQ:108490) share price has done very well over the last month, posting an excellent gain of 33%. But the gains over the last month weren't enough to make shareholders whole, as the share price is still down 9.5% in the last twelve months.

After such a large jump in price, given around half the companies in Korea's Electronic industry have price-to-sales ratios (or "P/S") below 0.7x, you may consider ROBOTIS as a stock to avoid entirely with its 10.8x P/S ratio. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the highly elevated P/S.

Check out our latest analysis for ROBOTIS

What Does ROBOTIS' P/S Mean For Shareholders?

ROBOTIS certainly has been doing a good job lately as it's been growing revenue more than most other companies. The P/S is probably high because investors think this strong revenue performance will continue. If not, then existing shareholders might be a little nervous about the viability of the share price.

Want the full picture on analyst estimates for the company? Then our free report on ROBOTIS will help you uncover what's on the horizon.

What Are Revenue Growth Metrics Telling Us About The High P/S?

ROBOTIS' 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.

Retrospectively, the last year delivered an exceptional 18% gain to the company's top line. The strong recent performance means it was also able to grow revenue by 49% in total over the last three years. Accordingly, shareholders would have definitely welcomed those medium-term rates of revenue growth.

Looking ahead now, revenue is anticipated to climb by 21% during the coming year according to the one analyst following the company. That's shaping up to be materially higher than the 9.8% growth forecast for the broader industry.

With this information, we can see why ROBOTIS is trading at such a high P/S compared to the industry. Apparently shareholders aren't keen to offload something that is potentially eyeing a more prosperous future.

The Key Takeaway

Shares in ROBOTIS have seen a strong upwards swing lately, which has really helped boost its P/S figure. Typically, we'd caution against reading too much into price-to-sales ratios when settling on investment decisions, though it can reveal plenty about what other market participants think about the company.

As we suspected, our examination of ROBOTIS' analyst forecasts revealed that its superior revenue outlook is contributing to its high P/S. Right now shareholders are comfortable with the P/S as they are quite confident future revenues aren't under threat. It's hard to see the share price falling strongly in the near future under these circumstances.

And what about other risks? Every company has them, and we've spotted 2 warning signs for ROBOTIS you should know about.

If these risks are making you reconsider your opinion on ROBOTIS, 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.