Chengdu Olymvax Biopharmaceuticals Inc. (SHSE:688319) Stock Rockets 40% As Investors Are Less Pessimistic Than Expected

The Chengdu Olymvax Biopharmaceuticals Inc. (SHSE:688319) share price has done very well over the last month, posting an excellent gain of 40%. Not all shareholders will be feeling jubilant, since the share price is still down a very disappointing 38% in the last twelve months.

Following the firm bounce in price, when almost half of the companies in China's Biotechs industry have price-to-sales ratios (or "P/S") below 7x, you may consider Chengdu Olymvax Biopharmaceuticals as a stock probably not worth researching with its 9.8x P/S ratio. However, the P/S might be high for a reason and it requires further investigation to determine if it's justified.

View our latest analysis for Chengdu Olymvax Biopharmaceuticals

How Has Chengdu Olymvax Biopharmaceuticals Performed Recently?

Chengdu Olymvax Biopharmaceuticals could be doing better as its revenue has been going backwards lately while most other companies have been seeing positive revenue growth. One possibility is that the P/S ratio is high because investors think this poor revenue performance will turn the corner. However, if this isn't the case, investors might get caught out paying too much for the stock.

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

Is There Enough Revenue Growth Forecasted For Chengdu Olymvax Biopharmaceuticals?

Chengdu Olymvax Biopharmaceuticals' P/S ratio would be typical for a company that's expected to deliver solid growth, and importantly, perform better than the industry.

Retrospectively, the last year delivered a frustrating 11% decrease to the company's top line. That put a dampener on the good run it was having over the longer-term as its three-year revenue growth is still a noteworthy 30% in total. Although it's been a bumpy ride, it's still fair to say the revenue growth recently has been mostly respectable for the company.

Looking ahead now, revenue is anticipated to climb by 36% during the coming year according to the dual analysts following the company. That's shaping up to be materially lower than the 230% growth forecast for the broader industry.

With this information, we find it concerning that Chengdu Olymvax Biopharmaceuticals is trading at a P/S higher than the industry. It seems most investors are hoping for a turnaround in the company's business prospects, but the analyst cohort is not so confident this will happen. There's a good chance these shareholders are setting themselves up for future disappointment if the P/S falls to levels more in line with the growth outlook.

What We Can Learn From Chengdu Olymvax Biopharmaceuticals' P/S?

The large bounce in Chengdu Olymvax Biopharmaceuticals' shares has lifted the company's P/S handsomely. 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.

It comes as a surprise to see Chengdu Olymvax Biopharmaceuticals trade at such a high P/S given the revenue forecasts look less than stellar. The weakness in the company's revenue estimate doesn't bode well for the elevated P/S, which could take a fall if the revenue sentiment doesn't improve. Unless these conditions improve markedly, it's very challenging to accept these prices as being reasonable.

Many other vital risk factors can be found on the company's balance sheet. Take a look at our free balance sheet analysis for Chengdu Olymvax Biopharmaceuticals with six simple checks on some of these key factors.

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.