Lacklustre Performance Is Driving IntegraGen SA's (EPA:ALINT) Low P/S

With a price-to-sales (or "P/S") ratio of 0.3x IntegraGen SA (EPA:ALINT) may be sending very bullish signals at the moment, given that almost half of all the Biotechs companies in France have P/S ratios greater than 6.7x and even P/S higher than 15x are not unusual. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's so limited.

View our latest analysis for IntegraGen

What Does IntegraGen's P/S Mean For Shareholders?

As an illustration, revenue has deteriorated at IntegraGen over the last year, which is not ideal at all. Perhaps the market believes the recent revenue performance isn't good enough to keep up the industry, causing the P/S ratio to suffer. However, if this doesn't eventuate then existing shareholders may be feeling optimistic about the future direction of the share price.

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

How Is IntegraGen's Revenue Growth Trending?

In order to justify its P/S ratio, IntegraGen would need to produce anemic growth that's substantially trailing the industry.

Retrospectively, the last year delivered a frustrating 4.6% decrease to the company's top line. Even so, admirably revenue has lifted 40% in aggregate from three years ago, notwithstanding the last 12 months. So we can start by confirming that the company has generally done a very good job of growing revenue over that time, even though it had some hiccups along the way.

This is in contrast to the rest of the industry, which is expected to grow by 254% over the next year, materially higher than the company's recent medium-term annualised growth rates.

With this in consideration, it's easy to understand why IntegraGen's P/S falls short of the mark set by its industry peers. Apparently many shareholders weren't comfortable holding on to something they believe will continue to trail the wider industry.

What Does IntegraGen's P/S Mean For Investors?

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.

As we suspected, our examination of IntegraGen revealed its three-year revenue trends are contributing to its low P/S, given they look worse than current industry expectations. 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.

Before you take the next step, you should know about the 2 warning signs for IntegraGen (1 makes us a bit uncomfortable!) that we have uncovered.

Of course, profitable companies with a history of great earnings growth are generally safer bets. So you may wish to see this free collection of other companies that have reasonable P/E ratios and have grown earnings strongly.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.