ROBOTIS Co., Ltd.'s (KOSDAQ:108490) P/S Is Still On The Mark Following 43% Share Price Bounce

ROBOTIS Co., Ltd. (KOSDAQ:108490) shareholders have had their patience rewarded with a 43% share price jump in the last month. The annual gain comes to 107% following the latest surge, making investors sit up and take notice.

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 ROBOTIS as a stock not worth researching with its 21.3x 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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Check out our latest analysis for ROBOTIS

What Does ROBOTIS' P/S Mean For Shareholders?

Recent times haven't been great for ROBOTIS as its revenue has been rising slower than most other companies. It might be that many expect the uninspiring revenue performance to recover significantly, which has kept the P/S ratio from collapsing. 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 ROBOTIS.

How Is ROBOTIS' Revenue Growth Trending?

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.

If we review the last year of revenue growth, the company posted a worthy increase of 3.1%. The latest three year period has also seen an excellent 34% overall rise in revenue, aided somewhat by its short-term performance. So we can start by confirming that the company has done a great job of growing revenues over that time.

Shifting to the future, estimates from the lone analyst covering the company suggest revenue should grow by 50% over the next year. That's shaping up to be materially higher than the 11% growth forecast for the broader industry.

With this in mind, it's not hard to understand why ROBOTIS' P/S is high relative to its industry peers. It seems most investors are expecting this strong future growth and are willing to pay more for the stock.

The Final Word

ROBOTIS' 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.

Our look into ROBOTIS shows that its P/S ratio remains high on the merit of its strong future revenues. It appears that shareholders are confident in the company's future revenues, which is propping up the P/S. It's hard to see the share price falling strongly in the near future under these circumstances.

We don't want to rain on the parade too much, but we did also find 1 warning sign for ROBOTIS that you need to be mindful of.

If strong companies turning a profit tickle your fancy, then you'll want to check out this free list of interesting companies that trade on a low P/E (but have proven they can grow earnings).

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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.