CANbridge Pharmaceuticals Inc. (HKG:1228) Not Doing Enough For Some Investors As Its Shares Slump 28%

The CANbridge Pharmaceuticals Inc. (HKG:1228) share price has fared very poorly over the last month, falling by a substantial 28%. The recent drop completes a disastrous twelve months for shareholders, who are sitting on a 85% loss during that time.

Following the heavy fall in price, CANbridge Pharmaceuticals may look like a strong buying opportunity at present with its price-to-sales (or "P/S") ratio of 0.7x, considering almost half of all companies in the Biotechs industry in Hong Kong have P/S ratios greater than 12.8x and even P/S higher than 55x 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 so limited.

Check out our latest analysis for CANbridge Pharmaceuticals

What Does CANbridge Pharmaceuticals' P/S Mean For Shareholders?

The revenue growth achieved at CANbridge Pharmaceuticals over the last year would be more than acceptable for most companies. It might be that many expect the respectable revenue performance to degrade substantially, which has repressed the P/S. Those who are bullish on CANbridge Pharmaceuticals will be hoping that this isn't the case, so that they can pick up the stock at a lower valuation.

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 CANbridge Pharmaceuticals' earnings, revenue and cash flow.

Do Revenue Forecasts Match The Low P/S Ratio?

CANbridge Pharmaceuticals' P/S ratio would be typical for a company that's expected to deliver very poor growth or even falling revenue, and importantly, perform much worse than the industry.

If we review the last year of revenue growth, the company posted a terrific increase of 20%. This great performance means it was also able to deliver immense revenue growth over the last three years. Therefore, it's fair to say the revenue growth recently has been superb for the company.

Comparing that to the industry, which is predicted to deliver 117% growth in the next 12 months, the company's momentum is weaker, based on recent medium-term annualised revenue results.

With this in consideration, it's easy to understand why CANbridge Pharmaceuticals' 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 We Can Learn From CANbridge Pharmaceuticals' P/S?

Shares in CANbridge Pharmaceuticals have plummeted and its P/S has followed suit. 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.

Our examination of CANbridge Pharmaceuticals confirms that the company's revenue trends over the past three-year years are a key factor in its low price-to-sales ratio, as we suspected, given they fall short of current industry expectations. Right now shareholders are accepting the low P/S as they concede future revenue probably won't provide any pleasant surprises. If recent medium-term revenue trends continue, it's hard to see the share price experience a reversal of fortunes anytime soon.

We don't want to rain on the parade too much, but we did also find 4 warning signs for CANbridge Pharmaceuticals (3 are a bit concerning!) that you need to be mindful of.

If companies with solid past earnings growth is up your alley, you may wish to see this free collection of other companies with strong earnings growth and low P/E ratios.

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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.