Not Many Are Piling Into Jiangsu Aidea Pharmaceutical Co., Ltd. (SHSE:688488) Stock Yet As It Plummets 25%

Jiangsu Aidea Pharmaceutical Co., Ltd. (SHSE:688488) shareholders won't be pleased to see that the share price has had a very rough month, dropping 25% and undoing the prior period's positive performance. The drop over the last 30 days has capped off a tough year for shareholders, with the share price down 44% in that time.

In spite of the heavy fall in price, there still wouldn't be many who think Jiangsu Aidea Pharmaceutical's price-to-sales (or "P/S") ratio of 7.4x is worth a mention when the median P/S in China's Biotechs industry is similar at about 6.5x. 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.

See our latest analysis for Jiangsu Aidea Pharmaceutical

What Does Jiangsu Aidea Pharmaceutical's Recent Performance Look Like?

Jiangsu Aidea Pharmaceutical hasn't been tracking well recently as its declining revenue compares poorly to other companies, which have seen some growth in their revenues on average. Perhaps the market is expecting its poor revenue performance to improve, keeping the P/S from dropping. If not, then existing shareholders may be a little nervous about the viability of the share price.

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

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

Jiangsu Aidea Pharmaceutical's P/S ratio would be typical for a company that's only expected to deliver moderate growth, and importantly, perform in line with the industry.

If we review the last year of revenue, the company posted a result that saw barely any deviation from a year ago. Still, the latest three year period has seen an excellent 32% overall rise in revenue, in spite of its uninspiring short-term performance. Therefore, it's fair to say the revenue growth recently has been great for the company, but investors will want to ask why it has slowed to such an extent.

Looking ahead now, revenue is anticipated to climb by 84% during the coming year according to the two analysts following the company. With the industry only predicted to deliver 53%, the company is positioned for a stronger revenue result.

With this information, we find it interesting that Jiangsu Aidea Pharmaceutical is trading at a fairly similar P/S compared to the industry. It may be that most investors aren't convinced the company can achieve future growth expectations.

The Key Takeaway

Following Jiangsu Aidea Pharmaceutical's share price tumble, its P/S is just clinging on to the industry median P/S. 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.

We've established that Jiangsu Aidea Pharmaceutical currently trades on a lower than expected P/S since its forecasted revenue growth is higher than the wider industry. Perhaps uncertainty in the revenue forecasts are what's keeping the P/S ratio consistent with the rest of the industry. At least the risk of a price drop looks to be subdued, but investors seem to think future revenue could see some volatility.

Before you settle on your opinion, we've discovered 1 warning sign for Jiangsu Aidea Pharmaceutical that you should be aware of.

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

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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.