Guangdong VTR Bio-Tech Co., Ltd.'s (SZSE:300381) Share Price Boosted 28% But Its Business Prospects Need A Lift Too

Those holding Guangdong VTR Bio-Tech Co., Ltd. (SZSE:300381) shares would be relieved that the share price has rebounded 28% in the last thirty days, but it needs to keep going to repair the recent damage it has caused to investor portfolios. Not all shareholders will be feeling jubilant, since the share price is still down a very disappointing 40% in the last twelve months.

In spite of the firm bounce in price, Guangdong VTR Bio-Tech may still look like a strong buying opportunity at present with its price-to-sales (or "P/S") ratio of 2.9x, considering almost half of all companies in the Biotechs industry in China have P/S ratios greater than 7.3x 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 Guangdong VTR Bio-Tech

What Does Guangdong VTR Bio-Tech's Recent Performance Look Like?

As an illustration, revenue has deteriorated at Guangdong VTR Bio-Tech over the last year, which is not ideal at all. It might be that many expect the disappointing revenue performance to continue or accelerate, which has repressed the P/S. However, if this doesn't eventuate then existing shareholders may be feeling optimistic about the future direction of the share price.

Want the full picture on earnings, revenue and cash flow for the company? Then our free report on Guangdong VTR Bio-Tech will help you shine a light on its historical performance.

Is There Any Revenue Growth Forecasted For Guangdong VTR Bio-Tech?

Guangdong VTR Bio-Tech's P/S ratio would be typical for a company that's expected to deliver very poor growth or even falling revenue, and importantly, perform much worse than the industry.

Taking a look back first, the company's revenue growth last year wasn't something to get excited about as it posted a disappointing decline of 47%. This means it has also seen a slide in revenue over the longer-term as revenue is down 60% in total over the last three years. Therefore, it's fair to say the revenue growth recently has been undesirable for the company.

Comparing that to the industry, which is predicted to deliver 162% growth in the next 12 months, the company's downward momentum based on recent medium-term revenue results is a sobering picture.

In light of this, it's understandable that Guangdong VTR Bio-Tech's P/S would sit below the majority of other companies. However, we think shrinking revenues are unlikely to lead to a stable P/S over the longer term, which could set up shareholders for future disappointment. There's potential for the P/S to fall to even lower levels if the company doesn't improve its top-line growth.

What Does Guangdong VTR Bio-Tech's P/S Mean For Investors?

Shares in Guangdong VTR Bio-Tech have risen appreciably however, its P/S is still subdued. It's argued the price-to-sales ratio is an inferior measure of value within certain industries, but it can be a powerful business sentiment indicator.

Our examination of Guangdong VTR Bio-Tech confirms that the company's shrinking revenue over the past medium-term is a key factor in its low price-to-sales ratio, given the industry is projected to grow. Right now shareholders are accepting the low P/S as they concede future revenue probably won't provide any pleasant surprises either. Given the current circumstances, it seems unlikely that the share price will experience any significant movement in either direction in the near future if recent medium-term revenue trends persist.

Plus, you should also learn about these 3 warning signs we've spotted with Guangdong VTR Bio-Tech (including 2 which are concerning).

If companies with solid past earnings growth is up your alley, you may wish to see this free collection of other companies with strong earnings growth and low P/E ratios.

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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.