Revenues Tell The Story For VINA TECH Co.,Ltd. (KOSDAQ:126340) As Its Stock Soars 55%

The VINA TECH Co.,Ltd. (KOSDAQ:126340) share price has done very well over the last month, posting an excellent gain of 55%. The annual gain comes to 178% following the latest surge, making investors sit up and take notice.

Since its price has surged higher, given around half the companies in Korea's Electronic industry have price-to-sales ratios (or "P/S") below 0.8x, you may consider VINA TECHLtd as a stock to avoid entirely with its 6.8x 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.

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Check out our latest analysis for VINA TECHLtd

What Does VINA TECHLtd's Recent Performance Look Like?

With its revenue growth in positive territory compared to the declining revenue of most other companies, VINA TECHLtd has been doing quite well of late. It seems that many are expecting the company to continue defying the broader industry adversity, which has increased investors’ willingness to pay up for the stock. However, if this isn't the case, investors might get caught out paying too much for the stock.

Keen to find out how analysts think VINA TECHLtd's future stacks up against the industry? In that case, our free report is a great place to start.

Do Revenue Forecasts Match The High P/S Ratio?

In order to justify its P/S ratio, VINA TECHLtd would need to produce outstanding growth that's well in excess of the industry.

If we review the last year of revenue growth, the company posted a terrific increase of 21%. The latest three year period has also seen a 11% overall rise in revenue, aided extensively by its short-term performance. Therefore, it's fair to say the revenue growth recently has been respectable for the company.

Turning to the outlook, the next year should generate growth of 55% as estimated by the lone analyst watching the company. Meanwhile, the rest of the industry is forecast to only expand by 26%, which is noticeably less attractive.

With this information, we can see why VINA TECHLtd 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

VINA TECHLtd's P/S has grown nicely over the last month thanks to a handy boost in the share price. 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.

Our look into VINA TECHLtd shows that its P/S ratio remains high on the merit of its strong future revenues. Right now shareholders are comfortable with the P/S as they are quite confident future revenues aren't under threat. Unless the analysts have really missed the mark, these strong revenue forecasts should keep the share price buoyant.

Before you take the next step, you should know about the 2 warning signs for VINA TECHLtd that we have uncovered.

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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.