Seojin System Co.,Ltd (KOSDAQ:178320) Shares Slammed 26% But Getting In Cheap Might Be Difficult Regardless

Seojin System Co.,Ltd (KOSDAQ:178320) shareholders won't be pleased to see that the share price has had a very rough month, dropping 26% and undoing the prior period's positive performance. Still, a bad month hasn't completely ruined the past year with the stock gaining 62%, which is great even in a bull market.

Even after such a large drop in price, given close to half the companies operating in Korea's Communications industry have price-to-sales ratios (or "P/S") below 1x, you may still consider Seojin SystemLtd as a stock to potentially avoid with its 1.5x 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 as high as it is.

Check out our latest analysis for Seojin SystemLtd

How Has Seojin SystemLtd Performed Recently?

With revenue growth that's superior to most other companies of late, Seojin SystemLtd has been doing relatively well. It seems that many are expecting the strong revenue performance to persist, which has raised the P/S. You'd really hope so, otherwise you're paying a pretty hefty price for no particular reason.

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

Is There Enough Revenue Growth Forecasted For Seojin SystemLtd?

There's an inherent assumption that a company should outperform the industry for P/S ratios like Seojin SystemLtd's to be considered reasonable.

Taking a look back first, we see that the company grew revenue by an impressive 17% last year. The strong recent performance means it was also able to grow revenue by 141% in total over the last three years. So we can start by confirming that the company has done a great job of growing revenue over that time.

Shifting to the future, estimates from the four analysts covering the company suggest revenue should grow by 58% over the next year. That's shaping up to be materially higher than the 51% growth forecast for the broader industry.

In light of this, it's understandable that Seojin SystemLtd's P/S sits above the majority of other companies. It seems most investors are expecting this strong future growth and are willing to pay more for the stock.

What We Can Learn From Seojin SystemLtd's P/S?

Seojin SystemLtd's P/S remain high even after its stock plunged. While the price-to-sales ratio shouldn't be the defining factor in whether you buy a stock or not, it's quite a capable barometer of revenue expectations.

Our look into Seojin SystemLtd 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.

You should always think about risks. Case in point, we've spotted 4 warning signs for Seojin SystemLtd you should be aware of, and 1 of them is a bit unpleasant.

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.

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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.

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