Biosynex SA's (EPA:ALBIO) Shares Bounce 28% But Its Business Still Trails The Industry

Biosynex SA (EPA:ALBIO) shares have had a really impressive month, gaining 28% after a shaky period beforehand. But the last month did very little to improve the 60% share price decline over the last year.

Although its price has surged higher, Biosynex may still be sending buy signals at present with its price-to-sales (or "P/S") ratio of 0.5x, considering almost half of all companies in the Medical Equipment industry in France have P/S ratios greater than 1.6x and even P/S higher than 4x aren't out of the ordinary. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's limited.

View our latest analysis for Biosynex

How Biosynex Has Been Performing

As an illustration, revenue has deteriorated at Biosynex over the last year, which is not ideal at all. One possibility is that the P/S is low because investors think the company won't do enough to avoid underperforming the broader industry in the near future. However, if this doesn't eventuate then existing shareholders may be feeling optimistic about the future direction of the share price.

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 Biosynex's earnings, revenue and cash flow.

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

The only time you'd be truly comfortable seeing a P/S as low as Biosynex's is when the company's growth is on track to lag the industry.

Retrospectively, the last year delivered a frustrating 53% decrease to the company's top line. This means it has also seen a slide in revenue over the longer-term as revenue is down 40% in total over the last three years. So unfortunately, we have to acknowledge that the company has not done a great job of growing revenue over that time.

In contrast to the company, the rest of the industry is expected to grow by 6.1% over the next year, which really puts the company's recent medium-term revenue decline into perspective.

With this information, we are not surprised that Biosynex is trading at a P/S lower than the industry. Nonetheless, there's no guarantee the P/S has reached a floor yet with revenue going in reverse. Even just maintaining these prices could be difficult to achieve as recent revenue trends are already weighing down the shares.

The Final Word

Despite Biosynex's share price climbing recently, its P/S still lags most other companies. 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.

It's no surprise that Biosynex maintains its low P/S off the back of its sliding revenue over the medium-term. At this stage investors feel the potential for an improvement in revenue isn't great enough to justify a higher P/S ratio. Unless the recent medium-term conditions improve, they will continue to form a barrier for the share price around these levels.

You need to take note of risks, for example - Biosynex has 4 warning signs (and 2 which are a bit concerning) we think you should know about.

It's important to make sure you look for a great company, not just the first idea you come across. So if growing profitability aligns with your idea of a great company, take a peek at this free list of interesting companies with strong recent earnings growth (and a low P/E).

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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.