What Staidson (Beijing) BioPharmaceuticals Co., Ltd.'s (SZSE:300204) 25% Share Price Gain Is Not Telling You

Staidson (Beijing) BioPharmaceuticals Co., Ltd. (SZSE:300204) shareholders are no doubt pleased to see that the share price has bounced 25% in the last month, although it is still struggling to make up recently lost ground. Not all shareholders will be feeling jubilant, since the share price is still down a very disappointing 28% in the last twelve months.

In spite of the firm bounce in price, you could still be forgiven for feeling indifferent about Staidson (Beijing) BioPharmaceuticals' P/S ratio of 8.4x, since the median price-to-sales (or "P/S") ratio for the Biotechs industry in China is also close to 7.7x. However, investors might be overlooking a clear opportunity or potential setback if there is no rational basis for the P/S.

View our latest analysis for Staidson (Beijing) BioPharmaceuticals

What Does Staidson (Beijing) BioPharmaceuticals' Recent Performance Look Like?

As an illustration, revenue has deteriorated at Staidson (Beijing) BioPharmaceuticals over the last year, which is not ideal at all. One possibility is that the P/S is moderate because investors think the company might still do enough to be in line with the broader industry in the near future. If you like the company, you'd at least be hoping this is the case so that you could potentially pick up some stock while it's not quite in favour.

We don't have analyst forecasts, but you can see how recent trends are setting up the company for the future by checking out our free report on Staidson (Beijing) BioPharmaceuticals' earnings, revenue and cash flow.

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

The only time you'd be comfortable seeing a P/S like Staidson (Beijing) BioPharmaceuticals' is when the company's growth is tracking the industry closely.

Retrospectively, the last year delivered a frustrating 19% decrease to the company's top line. This has erased any of its gains during the last three years, with practically no change in revenue being achieved in total. Accordingly, shareholders probably wouldn't have been overly satisfied with the unstable medium-term growth rates.

This is in contrast to the rest of the industry, which is expected to grow by 182% over the next year, materially higher than the company's recent medium-term annualised growth rates.

In light of this, it's curious that Staidson (Beijing) BioPharmaceuticals' P/S sits in line with the majority of other companies. Apparently many investors in the company are less bearish than recent times would indicate and aren't willing to let go of their stock right now. They may be setting themselves up for future disappointment if the P/S falls to levels more in line with recent growth rates.

The Bottom Line On Staidson (Beijing) BioPharmaceuticals' P/S

Staidson (Beijing) BioPharmaceuticals' stock has a lot of momentum behind it lately, which has brought its P/S level with the rest of the industry. Typically, we'd caution against reading too much into price-to-sales ratios when settling on investment decisions, though it can reveal plenty about what other market participants think about the company.

Our examination of Staidson (Beijing) BioPharmaceuticals revealed its poor three-year revenue trends aren't resulting in a lower P/S as per our expectations, given they look worse than current industry outlook. Right now we are uncomfortable with the P/S as this revenue performance isn't likely to support a more positive sentiment for long. Unless the recent medium-term conditions improve, it's hard to accept the current share price as fair value.

Plus, you should also learn about this 1 warning sign we've spotted with Staidson (Beijing) BioPharmaceuticals.

If strong companies turning a profit tickle your fancy, then you'll want to check out this free list of interesting companies that trade on a low P/E (but have proven they can grow earnings).

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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.