Market Might Still Lack Some Conviction On Neolife SA (EPA:ALNLF) Even After 32% Share Price Boost

Those holding Neolife SA (EPA:ALNLF) shares would be relieved that the share price has rebounded 32% in the last thirty days, but it needs to keep going to repair the recent damage it has caused to investor portfolios. Looking further back, the 21% rise over the last twelve months isn't too bad notwithstanding the strength over the last 30 days.

Even after such a large jump in price, there still wouldn't be many who think Neolife's price-to-sales (or "P/S") ratio of 0.7x is worth a mention when it essentially matches the median P/S in France's Professional Services industry. However, investors might be overlooking a clear opportunity or potential setback if there is no rational basis for the P/S.

Check out our latest analysis for Neolife

How Neolife Has Been Performing

For instance, Neolife's receding revenue in recent times would have to be some food for thought. Perhaps investors believe the recent revenue performance is enough to keep in line with the industry, which is keeping the P/S from dropping off. If not, then existing shareholders may be a little nervous about the viability of the share price.

Although there are no analyst estimates available for Neolife, take a look at this free data-rich visualisation to see how the company stacks up on earnings, revenue and cash flow.

Is There Some Revenue Growth Forecasted For Neolife?

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

In reviewing the last year of financials, we were disheartened to see the company's revenues fell to the tune of 5.5%. However, a few very strong years before that means that it was still able to grow revenue by an impressive 58% in total over the last three years. Although it's been a bumpy ride, it's still fair to say the revenue growth recently has been more than adequate for the company.

Comparing that recent medium-term revenue trajectory with the industry's one-year growth forecast of 10% shows it's noticeably more attractive.

In light of this, it's curious that Neolife's P/S sits in line with the majority of other companies. It may be that most investors are not convinced the company can maintain its recent growth rates.

What We Can Learn From Neolife's P/S?

Neolife's stock has a lot of momentum behind it lately, which has brought its P/S level with the rest of the industry. Generally, our preference is to limit the use of the price-to-sales ratio to establishing what the market thinks about the overall health of a company.

To our surprise, Neolife revealed its three-year revenue trends aren't contributing to its P/S as much as we would have predicted, given they look better than current industry expectations. It'd be fair to assume that potential risks the company faces could be the contributing factor to the lower than expected P/S. At least the risk of a price drop looks to be subdued if recent medium-term revenue trends continue, but investors seem to think future revenue could see some volatility.

Don't forget that there may be other risks. For instance, we've identified 3 warning signs for Neolife that you should be aware of.

If you're unsure about the strength of Neolife's business, why not explore our interactive list of stocks with solid business fundamentals for some other companies you may have missed.

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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.