A Piece Of The Puzzle Missing From Dongyang Express Corp.'s (KRX:084670) 54% Share Price Climb

Dongyang Express Corp. (KRX:084670) shareholders have had their patience rewarded with a 54% share price jump in the last month. Looking back a bit further, it's encouraging to see the stock is up 52% in the last year.

Although its price has surged higher, there still wouldn't be many who think Dongyang Express' price-to-sales (or "P/S") ratio of 0.3x is worth a mention when the median P/S in Korea's Transportation industry is similar at about 0.4x. While this might not raise any eyebrows, if the P/S ratio is not justified investors could be missing out on a potential opportunity or ignoring looming disappointment.

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See our latest analysis for Dongyang Express

What Does Dongyang Express' Recent Performance Look Like?

It looks like revenue growth has deserted Dongyang Express recently, which is not something to boast about. One possibility is that the P/S is moderate because investors think this benign revenue growth rate might not be enough to outperform the broader industry in the near future. If not, then existing shareholders may be feeling hopeful about the future direction of the share price.

We don't have analyst forecasts, but you can see how recent trends are setting up the company for the future by checking out our free report on Dongyang Express' earnings, revenue and cash flow.

What Are Revenue Growth Metrics Telling Us About The P/S?

Dongyang Express' P/S ratio would be typical for a company that's only expected to deliver moderate growth, and importantly, perform in line with the industry.

If we review the last year of revenue, the company posted a result that saw barely any deviation from a year ago. Regardless, revenue has managed to lift by a handy 25% in aggregate from three years ago, thanks to the earlier period of growth. Accordingly, shareholders probably wouldn't have been overly satisfied with the unstable medium-term growth rates.

Comparing that recent medium-term revenue trajectory with the industry's one-year growth forecast of 2.1% shows it's noticeably more attractive.

In light of this, it's curious that Dongyang Express' P/S sits in line with the majority of other companies. It may be that most investors are not convinced the company can maintain its recent growth rates.

The Bottom Line On Dongyang Express' P/S

Dongyang Express' stock has a lot of momentum behind it lately, which has brought its P/S level with the rest of the industry. 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.

We've established that Dongyang Express currently trades on a lower than expected P/S since its recent three-year growth is higher than the wider industry forecast. It'd be fair to assume that potential risks the company faces could be the contributing factor to the lower than expected P/S. It appears some are indeed anticipating revenue instability, because the persistence of these recent medium-term conditions would normally provide a boost to the share price.

Don't forget that there may be other risks. For instance, we've identified 2 warning signs for Dongyang Express (1 is significant) you should be aware of.

Of course, profitable companies with a history of great earnings growth are generally safer bets. So you may wish to see this free collection of other companies that have reasonable P/E ratios and have grown earnings strongly.

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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.