Subdued Growth No Barrier To ILSEUNG Co., Ltd. (KOSDAQ:333430) With Shares Advancing 31%

Simply Wall St · 6d ago

Despite an already strong run, ILSEUNG Co., Ltd. (KOSDAQ:333430) shares have been powering on, with a gain of 31% in the last thirty days. Looking back a bit further, it's encouraging to see the stock is up 65% in the last year.

Since its price has surged higher, given around half the companies in Korea's Machinery industry have price-to-sales ratios (or "P/S") below 0.9x, you may consider ILSEUNG as a stock to avoid entirely with its 2.9x P/S ratio. However, the P/S might be quite high for a reason and it requires further investigation to determine if it's justified.

View our latest analysis for ILSEUNG

ps-multiple-vs-industry
KOSDAQ:A333430 Price to Sales Ratio vs Industry January 7th 2025

What Does ILSEUNG's P/S Mean For Shareholders?

As an illustration, revenue has deteriorated at ILSEUNG over the last year, which is not ideal at all. It might be that many expect the company to still outplay most other companies over the coming period, which has kept the P/S from collapsing. You'd really hope so, otherwise you're paying a pretty hefty price for no particular reason.

Want the full picture on earnings, revenue and cash flow for the company? Then our free report on ILSEUNG will help you shine a light on its historical performance.

Is There Enough Revenue Growth Forecasted For ILSEUNG?

The only time you'd be truly comfortable seeing a P/S as steep as ILSEUNG's is when the company's growth is on track to outshine the industry decidedly.

In reviewing the last year of financials, we were disheartened to see the company's revenues fell to the tune of 13%. This has soured the latest three-year period, which nevertheless managed to deliver a decent 17% overall rise in revenue. Although it's been a bumpy ride, it's still fair to say the revenue growth recently has been mostly respectable for the company.

Comparing the recent medium-term revenue trends against the industry's one-year growth forecast of 45% shows it's noticeably less attractive.

With this information, we find it concerning that ILSEUNG is trading at a P/S higher than the industry. It seems most investors are ignoring the fairly limited recent growth rates and are hoping for a turnaround in the company's business prospects. Only the boldest would assume these prices are sustainable as a continuation of recent revenue trends is likely to weigh heavily on the share price eventually.

The Final Word

ILSEUNG's P/S has grown nicely over the last month thanks to a handy boost in the share price. We'd say the price-to-sales ratio's power isn't primarily as a valuation instrument but rather to gauge current investor sentiment and future expectations.

The fact that ILSEUNG currently trades on a higher P/S relative to the industry is an oddity, since its recent three-year growth is lower than the wider industry forecast. When we observe slower-than-industry revenue growth alongside a high P/S ratio, we assume there to be a significant risk of the share price decreasing, which would result in a lower P/S ratio. Unless there is a significant improvement in the company's medium-term performance, it will be difficult to prevent the P/S ratio from declining to a more reasonable level.

Plus, you should also learn about these 2 warning signs we've spotted with ILSEUNG (including 1 which shouldn't be ignored).

If these risks are making you reconsider your opinion on ILSEUNG, explore our interactive list of high quality stocks to get an idea of what else is out there.