Chunil Express Co., Ltd.'s (KRX:000650) P/S Still Appears To Be Reasonable

When you see that almost half of the companies in the Transportation industry in Korea have price-to-sales ratios (or "P/S") below 0.3x, Chunil Express Co., Ltd. (KRX:000650) looks to be giving off some sell signals with its 1.4x P/S ratio. However, the P/S might be high for a reason and it requires further investigation to determine if it's justified.

Check out our latest analysis for Chunil Express

What Does Chunil Express' Recent Performance Look Like?

Chunil Express has been doing a good job lately as it's been growing revenue at a solid pace. Perhaps the market is expecting this decent revenue performance to beat out the industry over the near term, which has kept the P/S propped up. However, if this isn't the case, investors might get caught out paying too much for the stock.

Although there are no analyst estimates available for Chunil Express, take a look at this free data-rich visualisation to see how the company stacks up on earnings, revenue and cash flow.

How Is Chunil Express' Revenue Growth Trending?

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

Retrospectively, the last year delivered a decent 8.5% gain to the company's revenues. The latest three year period has also seen an excellent 60% overall rise in revenue, aided somewhat by its short-term performance. Therefore, it's fair to say the revenue growth recently has been superb for the company.

This is in contrast to the rest of the industry, which is expected to grow by 6.7% over the next year, materially lower than the company's recent medium-term annualised growth rates.

In light of this, it's understandable that Chunil Express' P/S sits above the majority of other companies. Presumably shareholders aren't keen to offload something they believe will continue to outmanoeuvre the wider industry.

What We Can Learn From Chunil Express' P/S?

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.

As we suspected, our examination of Chunil Express revealed its three-year revenue trends are contributing to its high P/S, given they look better than current industry expectations. Right now shareholders are comfortable with the P/S as they are quite confident revenue aren't under threat. If recent medium-term revenue trends continue, it's hard to see the share price falling strongly in the near future under these circumstances.

It is also worth noting that we have found 3 warning signs for Chunil Express (2 are concerning!) that you need to take into consideration.

If you're unsure about the strength of Chunil Express' business, why not explore our interactive list of stocks with solid business fundamentals for some other companies you may have missed.

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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