Hvsen Biotechnology Co., Ltd. (SZSE:300871) Stock Catapults 26% Though Its Price And Business Still Lag The Industry

Hvsen Biotechnology Co., Ltd. (SZSE:300871) shares have continued their recent momentum with a 26% gain in the last month alone. Not all shareholders will be feeling jubilant, since the share price is still down a very disappointing 19% in the last twelve months.

Although its price has surged higher, Hvsen Biotechnology may still be sending bullish signals at the moment with its price-to-sales (or "P/S") ratio of 1.8x, since almost half of all companies in the Pharmaceuticals industry in China have P/S ratios greater than 3.8x and even P/S higher than 8x are not unusual. However, the P/S might be low for a reason and it requires further investigation to determine if it's justified.

Check out our latest analysis for Hvsen Biotechnology

What Does Hvsen Biotechnology's Recent Performance Look Like?

With revenue growth that's inferior to most other companies of late, Hvsen Biotechnology has been relatively sluggish. It seems that many are expecting the uninspiring revenue performance to persist, which has repressed the growth of the P/S ratio. If you still like the company, you'd be hoping revenue doesn't get any worse and that you could pick up some stock while it's out of favour.

Keen to find out how analysts think Hvsen Biotechnology's future stacks up against the industry? In that case, our free report is a great place to start.

How Is Hvsen Biotechnology's Revenue Growth Trending?

There's an inherent assumption that a company should underperform the industry for P/S ratios like Hvsen Biotechnology's to be considered reasonable.

Taking a look back first, we see that the company managed to grow revenues by a handy 7.5% last year. Revenue has also lifted 9.1% in aggregate from three years ago, partly thanks to the last 12 months of growth. Therefore, it's fair to say the revenue growth recently has been respectable for the company.

Turning to the outlook, the next year should generate growth of 32% as estimated by the dual analysts watching the company. Meanwhile, the rest of the industry is forecast to expand by 226%, which is noticeably more attractive.

With this information, we can see why Hvsen Biotechnology is trading at a P/S lower than the industry. Apparently many shareholders weren't comfortable holding on while the company is potentially eyeing a less prosperous future.

What Does Hvsen Biotechnology's P/S Mean For Investors?

Despite Hvsen Biotechnology's share price climbing recently, its P/S still lags most other companies. Using the price-to-sales ratio alone to determine if you should sell your stock isn't sensible, however it can be a practical guide to the company's future prospects.

As expected, our analysis of Hvsen Biotechnology's analyst forecasts confirms that the company's underwhelming revenue outlook is a major contributor 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. The company will need a change of fortune to justify the P/S rising higher in the future.

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

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.