The Price Is Right For Solus Advanced Materials Co., Ltd. (KRX:336370) Even After Diving 25%

Solus Advanced Materials Co., Ltd. (KRX:336370) shareholders that were waiting for something to happen have been dealt a blow with a 25% share price drop in the last month. Instead of being rewarded, shareholders who have already held through the last twelve months are now sitting on a 17% share price drop.

In spite of the heavy fall in price, when almost half of the companies in Korea's Electronic industry have price-to-sales ratios (or "P/S") below 0.6x, you may still consider Solus Advanced Materials as a stock probably not worth researching with its 1.7x 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 as high as it is.

Check out our latest analysis for Solus Advanced Materials

What Does Solus Advanced Materials' Recent Performance Look Like?

Solus Advanced Materials certainly has been doing a good job lately as it's been growing revenue more than most other companies. The P/S is probably high because investors think this strong revenue performance will continue. You'd really hope so, otherwise you're paying a pretty hefty price for no particular reason.

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

How Is Solus Advanced Materials' Revenue Growth Trending?

The only time you'd be truly comfortable seeing a P/S as high as Solus Advanced Materials' is when the company's growth is on track to outshine the industry.

If we review the last year of revenue growth, the company posted a terrific increase of 21%. Pleasingly, revenue has also lifted 43% in aggregate from three years ago, thanks to the last 12 months of growth. Therefore, it's fair to say the revenue growth recently has been superb for the company.

Turning to the outlook, the next three years should generate growth of 27% per annum as estimated by the eight analysts watching the company. That's shaping up to be materially higher than the 9.2% each year growth forecast for the broader industry.

With this information, we can see why Solus Advanced Materials 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.

What Does Solus Advanced Materials' P/S Mean For Investors?

Solus Advanced Materials' P/S remain high even after its stock plunged. 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.

As we suspected, our examination of Solus Advanced Materials' analyst forecasts revealed that its superior revenue outlook is contributing to its high P/S. 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.

There are also other vital risk factors to consider before investing and we've discovered 1 warning sign for Solus Advanced Materials that you should be aware of.

If strong companies turning a profit tickle your fancy, then you'll want to check out this free list of interesting companies that trade on a low P/E (but have proven they can grow earnings).

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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.