Market Might Still Lack Some Conviction On WSI Co., Ltd. (KOSDAQ:299170) Even After 29% Share Price Boost
Despite an already strong run, WSI Co., Ltd. (KOSDAQ:299170) shares have been powering on, with a gain of 29% in the last thirty days. The annual gain comes to 131% following the latest surge, making investors sit up and take notice.
In spite of the firm bounce in price, it's still not a stretch to say that WSI's price-to-sales (or "P/S") ratio of 2.3x right now seems quite "middle-of-the-road" compared to the Healthcare industry in Korea, where the median P/S ratio is around 1.9x. Although, it's not wise to simply ignore the P/S without explanation as investors may be disregarding a distinct opportunity or a costly mistake.
Check out our latest analysis for WSI
How WSI Has Been Performing
With revenue growth that's exceedingly strong of late, WSI has been doing very well. The P/S is probably moderate because investors think this strong revenue growth might not be enough to outperform the broader industry in the near future. If you like the company, you'd be hoping this isn't the case so that you could potentially pick up some stock while it's not quite in favour.
Although there are no analyst estimates available for WSI, take a look at this free data-rich visualisation to see how the company stacks up on earnings, revenue and cash flow.Do Revenue Forecasts Match The P/S Ratio?
In order to justify its P/S ratio, WSI would need to produce growth that's similar to the industry.
If we review the last year of revenue growth, the company posted a terrific increase of 36%. The latest three year period has also seen an excellent 84% overall rise in revenue, aided by its short-term performance. Therefore, it's fair to say the revenue growth recently has been superb for the company.
Comparing that to the industry, which is only predicted to deliver 16% growth in the next 12 months, the company's momentum is stronger based on recent medium-term annualised revenue results.
With this information, we find it interesting that WSI is trading at a fairly similar P/S compared to the industry. Apparently some shareholders believe the recent performance is at its limits and have been accepting lower selling prices.
What We Can Learn From WSI's P/S?
WSI's stock has a lot of momentum behind it lately, which has brought its P/S level with the rest of the industry. It's argued the price-to-sales ratio is an inferior measure of value within certain industries, but it can be a powerful business sentiment indicator.
To our surprise, WSI revealed its three-year revenue trends aren't contributing to its P/S as much as we would have predicted, given they look better than current industry expectations. There could be some unobserved threats to revenue preventing the P/S ratio from matching this positive performance. 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.
There are also other vital risk factors to consider and we've discovered 4 warning signs for WSI (1 can't be ignored!) that you should be aware of before investing here.
If companies with solid past earnings growth is up your alley, you may wish to see this free collection of other companies with strong earnings growth and low P/E ratios.
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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.