Dongbang Transport Logistics Co., Ltd. (KRX:004140) Soars 37% But It's A Story Of Risk Vs Reward

Dongbang Transport Logistics Co., Ltd. (KRX:004140) shareholders have had their patience rewarded with a 37% share price jump in the last month. The last 30 days bring the annual gain to a very sharp 32%.

Even after such a large jump in price, Dongbang Transport Logistics may still be sending buy signals at present with its price-to-sales (or "P/S") ratio of 0.2x, considering almost half of all companies in the Infrastructure industry in Korea have P/S ratios greater than 2x and even P/S higher than 4x aren't out of the ordinary. However, the P/S might be low for a reason and it requires further investigation to determine if it's justified.

View our latest analysis for Dongbang Transport Logistics

What Does Dongbang Transport Logistics' Recent Performance Look Like?

We'd have to say that with no tangible growth over the last year, Dongbang Transport Logistics' revenue has been unimpressive. It might be that many expect the uninspiring revenue performance to worsen, which has repressed the P/S. If not, then existing shareholders may be feeling optimistic about the future direction of the share price.

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

Is There Any Revenue Growth Forecasted For Dongbang Transport Logistics?

The only time you'd be truly comfortable seeing a P/S as low as Dongbang Transport Logistics' is when the company's growth is on track to lag the industry.

Retrospectively, the last year delivered virtually the same number to the company's top line as the year before. However, a few strong years before that means that it was still able to grow revenue by an impressive 37% in total over the last three years. Accordingly, shareholders will be pleased, but also have some questions to ponder about the last 12 months.

Weighing that recent medium-term revenue trajectory against the broader industry's one-year forecast for expansion of 11% shows it's about the same on an annualised basis.

With this information, we find it odd that Dongbang Transport Logistics is trading at a P/S lower than the industry. It may be that most investors are not convinced the company can maintain recent growth rates.

What Does Dongbang Transport Logistics' P/S Mean For Investors?

Dongbang Transport Logistics' stock price has surged recently, but its but its P/S still remains modest. 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.

Our examination of Dongbang Transport Logistics revealed its three-year revenue trends looking similar to current industry expectations hasn't given the P/S the boost we expected, given that it's lower than the wider industry P/S, There could be some unobserved threats to revenue preventing the P/S ratio from matching the company's performance. It appears some are indeed anticipating revenue instability, because the persistence of these recent medium-term conditions should normally provide more support to the share price.

We don't want to rain on the parade too much, but we did also find 3 warning signs for Dongbang Transport Logistics (1 doesn't sit too well with us!) that you need to be mindful 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).

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.