DAEDUCK ELECTRONICS Co., Ltd.'s (KRX:353200) P/S Is Still On The Mark Following 34% Share Price Bounce

Despite an already strong run, DAEDUCK ELECTRONICS Co., Ltd. (KRX:353200) shares have been powering on, with a gain of 34% in the last thirty days. The last month tops off a massive increase of 176% in the last year.

After such a large jump in price, when almost half of the companies in Korea's Electronic industry have price-to-sales ratios (or "P/S") below 0.8x, you may consider DAEDUCK ELECTRONICS as a stock probably not worth researching with its 2.7x 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.

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View our latest analysis for DAEDUCK ELECTRONICS

What Does DAEDUCK ELECTRONICS' Recent Performance Look Like?

DAEDUCK ELECTRONICS' negative revenue growth of late has neither been better nor worse than most other companies. It might be that many expect the company's revenue to strengthen positively despite the tough industry conditions, which has kept the P/S from falling. If not, then existing shareholders may be a little nervous about the viability of the share price.

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

Do Revenue Forecasts Match The High P/S Ratio?

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

Taking a look back first, the company's revenue growth last year wasn't something to get excited about as it posted a disappointing decline of 2.7%. This means it has also seen a slide in revenue over the longer-term as revenue is down 24% in total over the last three years. So unfortunately, we have to acknowledge that the company has not done a great job of growing revenue over that time.

Turning to the outlook, the next year should generate growth of 28% as estimated by the five analysts watching the company. Meanwhile, the rest of the industry is forecast to only expand by 18%, which is noticeably less attractive.

With this in mind, it's not hard to understand why DAEDUCK ELECTRONICS' P/S is high relative to its industry peers. It seems most investors are expecting this strong future growth and are willing to pay more for the stock.

What Does DAEDUCK ELECTRONICS' P/S Mean For Investors?

DAEDUCK ELECTRONICS' P/S is on the rise since its shares have risen strongly. 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.

We've established that DAEDUCK ELECTRONICS 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. It appears that shareholders are confident in the company's future revenues, which is propping up the P/S. 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 DAEDUCK ELECTRONICS that you need to take into consideration.

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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.