VINA TECH Co.,Ltd. (KOSDAQ:126340) shares have continued their recent momentum with a 25% gain in the last month alone. Longer-term shareholders would be thankful for the recovery in the share price since it's now virtually flat for the year after the recent bounce.
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 0.8x, you may consider VINA TECHLtd as a stock to avoid entirely with its 3.7x 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.
Check out our latest analysis for VINA TECHLtd
How Has VINA TECHLtd Performed Recently?
With revenue growth that's superior to most other companies of late, VINA TECHLtd has been doing relatively well. It seems the market expects this form will continue into the future, hence the elevated P/S ratio. You'd really hope so, otherwise you're paying a pretty hefty price for no particular reason.
Want the full picture on analyst estimates for the company? Then our free report on VINA TECHLtd will help you uncover what's on the horizon.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.
Retrospectively, the last year delivered a decent 9.9% gain to the company's revenues. Revenue has also lifted 15% in aggregate from three years ago, partly thanks to the last 12 months of growth. Therefore, it's fair to say the revenue growth recently has been respectable for the company.
Turning to the outlook, the next three years should generate growth of 26% per annum as estimated by the two analysts watching the company. Meanwhile, the rest of the industry is forecast to only expand by 14% each year, which is noticeably less attractive.
In light of this, it's understandable that VINA TECHLtd's P/S sits above the majority of other companies. Apparently shareholders aren't keen to offload something that is potentially eyeing a more prosperous future.
What Does VINA TECHLtd's P/S Mean For Investors?
Shares in VINA TECHLtd 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.
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.
It is also worth noting that we have found 2 warning signs for VINA TECHLtd (1 is a bit unpleasant!) that you need to take into consideration.
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.
Valuation is complex, but we're here to simplify it.
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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.