Revenues Tell The Story For Seojin System Co.,Ltd (KOSDAQ:178320) As Its Stock Soars 33%

The Seojin System Co.,Ltd (KOSDAQ:178320) share price has done very well over the last month, posting an excellent gain of 33%. Unfortunately, despite the strong performance over the last month, the full year gain of 2.5% isn't as attractive.

In spite of the firm bounce in price, it's still not a stretch to say that Seojin SystemLtd's price-to-sales (or "P/S") ratio of 1.4x right now seems quite "middle-of-the-road" compared to the Communications industry in Korea, where the median P/S ratio is around 1.1x. While this might not raise any eyebrows, if the P/S ratio is not justified investors could be missing out on a potential opportunity or ignoring looming disappointment.

Trump has pledged to "unleash" American oil and gas and these 15 US stocks have developments that are poised to benefit.

Check out our latest analysis for Seojin SystemLtd

How Has Seojin SystemLtd Performed Recently?

Recent revenue growth for Seojin SystemLtd has been in line with the industry. The P/S ratio is probably moderate because investors think this modest revenue performance will continue. Those who are bullish on Seojin SystemLtd will be hoping that revenue performance can pick up, so that they can pick up the stock at a slightly lower valuation.

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

Is There Some Revenue Growth Forecasted For Seojin SystemLtd?

In order to justify its P/S ratio, Seojin SystemLtd would need to produce growth that's similar to the industry.

If we review the last year of revenue growth, the company posted a worthy increase of 6.3%. This was backed up an excellent period prior to see revenue up by 68% in total over the last three years. Accordingly, shareholders would have definitely welcomed those medium-term rates of revenue growth.

Turning to the outlook, the next year should generate growth of 39% as estimated by the three analysts watching the company. That's shaping up to be similar to the 40% growth forecast for the broader industry.

In light of this, it's understandable that Seojin SystemLtd's P/S sits in line with the majority of other companies. It seems most investors are expecting to see average future growth and are only willing to pay a moderate amount for the stock.

What Does Seojin SystemLtd's P/S Mean For Investors?

Seojin SystemLtd's stock has a lot of momentum behind it lately, which has brought its P/S level with the rest of the industry. 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 at Seojin SystemLtd's revenue growth estimates show that its P/S is about what we expect, as both metrics follow closely with the industry averages. Right now shareholders are comfortable with the P/S as they are quite confident future revenue won't throw up any surprises. Unless these conditions change, they will continue to support the share price at these levels.

And what about other risks? Every company has them, and we've spotted 1 warning sign for Seojin SystemLtd you should know about.

Of course, profitable companies with a history of great earnings growth are generally safer bets. So you may wish to see this free collection of other companies that have reasonable P/E ratios and have grown earnings strongly.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.