Investors Appear Satisfied With Genscript Biotech Corporation's (HKG:1548) Prospects As Shares Rocket 29%

Genscript Biotech Corporation (HKG:1548) shareholders are no doubt pleased to see that the share price has bounced 29% in the last month, although it is still struggling to make up recently lost ground. Not all shareholders will be feeling jubilant, since the share price is still down a very disappointing 15% in the last twelve months.

Following the firm bounce in price, Genscript Biotech may be sending bearish signals at the moment with its price-to-sales (or "P/S") ratio of 5.6x, since almost half of all companies in the Life Sciences in Hong Kong have P/S ratios under 4.3x and even P/S lower than 1x are not unusual. However, the P/S might be high for a reason and it requires further investigation to determine if it's justified.

Check out our latest analysis for Genscript Biotech

What Does Genscript Biotech's P/S Mean For Shareholders?

Genscript Biotech could be doing better as it's been growing revenue less than most other companies lately. It might be that many expect the uninspiring revenue performance to recover significantly, which has kept the P/S ratio from collapsing. If not, then existing shareholders may be very nervous about the viability of the share price.

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

How Is Genscript Biotech's Revenue Growth Trending?

The only time you'd be truly comfortable seeing a P/S as high as Genscript Biotech's is when the company's growth is on track to outshine the industry.

Taking a look back first, we see that the company grew revenue by an impressive 34% last year. The latest three year period has also seen an excellent 115% overall rise in revenue, aided by its short-term performance. So we can start by confirming that the company has done a great job of growing revenue over that time.

Turning to the outlook, the next three years should generate growth of 44% each year as estimated by the twelve analysts watching the company. Meanwhile, the rest of the industry is forecast to only expand by 19% per year, which is noticeably less attractive.

With this in mind, it's not hard to understand why Genscript Biotech's P/S is high relative to its industry peers. It seems most investors are expecting this strong future growth and are willing to pay more for the stock.

What We Can Learn From Genscript Biotech's P/S?

Genscript Biotech's P/S is on the rise since its shares have risen strongly. 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.

We've established that Genscript Biotech maintains its high P/S on the strength of its forecasted revenue growth being higher than the the rest of the Life Sciences industry, as expected. It appears that shareholders are confident in the company's future revenues, which is propping up the P/S. Unless the analysts have really missed the mark, these strong revenue forecasts should keep the share price buoyant.

The company's balance sheet is another key area for risk analysis. You can assess many of the main risks through our free balance sheet analysis for Genscript Biotech with six simple checks.

If you're unsure about the strength of Genscript Biotech's business, why not explore our interactive list of stocks with solid business fundamentals for some other companies you may have missed.

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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.