Genfit S.A. (EPA:GNFT) Not Doing Enough For Some Investors As Its Shares Slump 25%

The Genfit S.A. (EPA:GNFT) share price has softened a substantial 25% over the previous 30 days, handing back much of the gains the stock has made lately. Looking at the bigger picture, even after this poor month the stock is up 37% in the last year.

After such a large drop in price, Genfit may be sending bullish signals at the moment with its price-to-sales (or "P/S") ratio of 2.6x, since almost half of all companies in the Biotechs industry in France have P/S ratios greater than 4.4x and even P/S higher than 9x are not unusual. However, the P/S might be low for a reason and it requires further investigation to determine if it's justified.

See our latest analysis for Genfit

How Has Genfit Performed Recently?

With revenue growth that's inferior to most other companies of late, Genfit 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.

Want the full picture on analyst estimates for the company? Then our free report on Genfit will help you uncover what's on the horizon.

Is There Any Revenue Growth Forecasted For Genfit?

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

Retrospectively, the last year delivered an exceptional 175% gain to the company's top line. This great performance means it was also able to deliver immense revenue growth over the last three years. Accordingly, shareholders would have been over the moon with those medium-term rates of revenue growth.

Looking ahead now, revenue is anticipated to climb by 8.5% each year during the coming three years according to the four analysts following the company. Meanwhile, the rest of the industry is forecast to expand by 61% each year, which is noticeably more attractive.

In light of this, it's understandable that Genfit's P/S sits below the majority of other companies. It seems most investors are expecting to see limited future growth and are only willing to pay a reduced amount for the stock.

The Bottom Line On Genfit's P/S

Genfit's recently weak share price has pulled its P/S back below other Biotechs 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.

We've established that Genfit maintains its low P/S on the weakness of its forecast growth being lower than the wider industry, as expected. Right now shareholders are accepting the low P/S as they concede future revenue probably won't provide any pleasant surprises. Unless these conditions improve, they will continue to form a barrier for the share price around these levels.

There are also other vital risk factors to consider and we've discovered 2 warning signs for Genfit (1 is potentially serious!) that you should be aware of before investing here.

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.

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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.