CANbridge Pharmaceuticals Inc. (HKG:1228) Stock Catapults 31% Though Its Price And Business Still Lag The Industry

CANbridge Pharmaceuticals Inc. (HKG:1228) shares have had a really impressive month, gaining 31% after a shaky period beforehand. Still, the 30-day jump doesn't change the fact that longer term shareholders have seen their stock decimated by the 76% share price drop in the last twelve months.

Although its price has surged higher, CANbridge Pharmaceuticals may still be sending very bullish signals at the moment with its price-to-sales (or "P/S") ratio of 1.2x, since almost half of all companies in the Biotechs industry in Hong Kong have P/S ratios greater than 9.2x and even P/S higher than 54x 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.

See our latest analysis for CANbridge Pharmaceuticals

What Does CANbridge Pharmaceuticals' Recent Performance Look Like?

CANbridge Pharmaceuticals could be doing better as it's been growing revenue less than most other companies lately. It seems that many are expecting the uninspiring revenue performance to persist, which has repressed the growth of the P/S ratio. If this is the case, then existing shareholders will probably struggle to get excited about the future direction of the share price.

Keen to find out how analysts think CANbridge Pharmaceuticals' future stacks up against the industry? In that case, our free report is a great place to start.

How Is CANbridge Pharmaceuticals' Revenue Growth Trending?

There's an inherent assumption that a company should far underperform the industry for P/S ratios like CANbridge Pharmaceuticals' to be considered reasonable.

Retrospectively, the last year delivered an exceptional 20% 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 34% during the coming year according to the only analyst following the company. Meanwhile, the rest of the industry is forecast to expand by 80%, which is noticeably more attractive.

In light of this, it's understandable that CANbridge Pharmaceuticals' 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 Key Takeaway

Even after such a strong price move, CANbridge Pharmaceuticals' P/S still trails the rest of the industry. Typically, we'd caution against reading too much into price-to-sales ratios when settling on investment decisions, though it can reveal plenty about what other market participants think about the company.

As expected, our analysis of CANbridge Pharmaceuticals' analyst forecasts confirms that the company's underwhelming revenue outlook is a major contributor to its low P/S. 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.

Before you settle on your opinion, we've discovered 5 warning signs for CANbridge Pharmaceuticals (3 are potentially serious!) that you should be aware of.

If these risks are making you reconsider your opinion on CANbridge Pharmaceuticals, explore our interactive list of high quality stocks to get an idea of what else is out there.

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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.