Market Participants Recognise JNTC Co., Ltd.'s (KOSDAQ:204270) Revenues Pushing Shares 51% Higher

JNTC Co., Ltd. (KOSDAQ:204270) shares have continued their recent momentum with a 51% gain in the last month alone. The annual gain comes to 127% 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 1.1x, you may consider JNTC as a stock not worth researching with its 3.4x 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.

View our latest analysis for JNTC

What Does JNTC's P/S Mean For Shareholders?

JNTC certainly has been doing a good job lately as it's been growing revenue more than most other companies. It seems that many are expecting the strong revenue performance to persist, which has raised the P/S. If not, then existing shareholders might be a little nervous about the viability of the share price.

Want the full picture on analyst estimates for the company? Then our free report on JNTC will help you uncover what's on the horizon.

Is There Enough Revenue Growth Forecasted For JNTC?

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

Taking a look back first, we see that the company grew revenue by an impressive 100% last year. Still, revenue has fallen 7.0% in total from three years ago, which is quite disappointing. Accordingly, shareholders would have felt downbeat about the medium-term rates of revenue growth.

Shifting to the future, estimates from the three analysts covering the company suggest revenue should grow by 30% per year over the next three years. Meanwhile, the rest of the industry is forecast to only expand by 15% each year, which is noticeably less attractive.

With this information, we can see why JNTC is trading at such a high P/S compared to the industry. Apparently shareholders aren't keen to offload something that is potentially eyeing a more prosperous future.

The Final Word

JNTC's P/S has grown nicely over the last month thanks to a handy boost in the share price. It's argued the price-to-sales ratio is an inferior measure of value within certain industries, but it can be a powerful business sentiment indicator.

We've established that JNTC maintains its high P/S on the strength of its forecasted revenue growth being higher than the the rest of the Electronic industry, as expected. At this stage investors feel the potential for a deterioration in revenues is quite remote, justifying the elevated P/S ratio. Unless these conditions change, they will continue to provide strong support to the share price.

We don't want to rain on the parade too much, but we did also find 2 warning signs for JNTC that you need to be mindful of.

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.

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.