TECON BIOLOGY Co.LTD (SZSE:002100) Could Be Riskier Than It Looks

You may think that with a price-to-sales (or "P/S") ratio of 0.5x TECON BIOLOGY Co.LTD (SZSE:002100) is a stock worth checking out, seeing as almost half of all the Food companies in China have P/S ratios greater than 1.6x and even P/S higher than 4x aren't out of the ordinary. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the reduced P/S.

Check out our latest analysis for TECON BIOLOGYLTD

What Does TECON BIOLOGYLTD's P/S Mean For Shareholders?

There hasn't been much to differentiate TECON BIOLOGYLTD's and the industry's revenue growth lately. It might be that many expect the mediocre revenue performance to degrade, which has repressed the P/S ratio. If not, then existing shareholders have reason to be optimistic about the future direction of the share price.

Want the full picture on analyst estimates for the company? Then our free report on TECON BIOLOGYLTD will help you uncover what's on the horizon.

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

In order to justify its P/S ratio, TECON BIOLOGYLTD would need to produce sluggish growth that's trailing the industry.

Retrospectively, the last year delivered virtually the same number to the company's top line as the year before. Still, the latest three year period was better as it's delivered a decent 19% overall rise in revenue. Therefore, it's fair to say that revenue growth has been inconsistent recently for the company.

Looking ahead now, revenue is anticipated to climb by 20% during the coming year according to the eight analysts following the company. Meanwhile, the rest of the industry is forecast to only expand by 16%, which is noticeably less attractive.

With this information, we find it odd that TECON BIOLOGYLTD is trading at a P/S lower than the industry. It looks like most investors are not convinced at all that the company can achieve future growth expectations.

What Does TECON BIOLOGYLTD's P/S Mean For Investors?

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.

To us, it seems TECON BIOLOGYLTD currently trades on a significantly depressed P/S given its forecasted revenue growth is higher than the rest of its industry. There could be some major risk factors that are placing downward pressure on the P/S ratio. At least price risks look to be very low, but investors seem to think future revenues could see a lot of volatility.

The company's balance sheet is another key area for risk analysis. Our free balance sheet analysis for TECON BIOLOGYLTD with six simple checks will allow you to discover any risks that could be an issue.

It's important to make sure you look for a great company, not just the first idea you come across. So if growing profitability aligns with your idea of a great company, take a peek at this free list of interesting companies with strong recent earnings growth (and a low P/E).

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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.