There's No Escaping Kexing Biopharm Co., Ltd.'s (SHSE:688136) Muted Revenues Despite A 31% Share Price Rise

Despite an already strong run, Kexing Biopharm Co., Ltd. (SHSE:688136) shares have been powering on, with a gain of 31% in the last thirty days. Notwithstanding the latest gain, the annual share price return of 9.6% isn't as impressive.

Although its price has surged higher, Kexing Biopharm may still look like a strong buying opportunity at present with its price-to-sales (or "P/S") ratio of 3.3x, considering almost half of all companies in the Biotechs industry in China have P/S ratios greater than 7x and even P/S higher than 12x aren't out of the ordinary. However, the P/S might be quite low for a reason and it requires further investigation to determine if it's justified.

See our latest analysis for Kexing Biopharm

How Kexing Biopharm Has Been Performing

Kexing Biopharm could be doing better as its revenue has been going backwards lately while most other companies have been seeing positive revenue growth. The P/S ratio is probably low because investors think this poor revenue performance isn't going to get any better. So while you could say the stock is cheap, investors will be looking for improvement before they see it as good value.

If you'd like to see what analysts are forecasting going forward, you should check out our free report on Kexing Biopharm.

Is There Any Revenue Growth Forecasted For Kexing Biopharm?

In order to justify its P/S ratio, Kexing Biopharm would need to produce anemic growth that's substantially trailing the industry.

Taking a look back first, we see that there was hardly any revenue growth to speak of for the company over the past year. Fortunately, a few good years before that means that it was still able to grow revenue by 8.4% in total over the last three years. Accordingly, shareholders probably wouldn't have been overly satisfied with the unstable medium-term growth rates.

Turning to the outlook, the next year should generate growth of 38% as estimated by the three analysts watching the company. Meanwhile, the rest of the industry is forecast to expand by 55%, which is noticeably more attractive.

With this in consideration, its clear as to why Kexing Biopharm's P/S is falling short industry peers. Apparently many shareholders weren't comfortable holding on while the company is potentially eyeing a less prosperous future.

What Does Kexing Biopharm's P/S Mean For Investors?

Shares in Kexing Biopharm have risen appreciably however, its P/S is still subdued. 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.

As we suspected, our examination of Kexing Biopharm's analyst forecasts revealed that its inferior revenue outlook is contributing to its low P/S. Shareholders' pessimism on the revenue prospects for the company seems to be the main contributor to the depressed P/S. It's hard to see the share price rising strongly in the near future under these circumstances.

We don't want to rain on the parade too much, but we did also find 1 warning sign for Kexing Biopharm that you need to be mindful 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.