There's No Escaping TOT BIOPHARM International Company Limited's (HKG:1875) Muted Revenues

With a price-to-sales (or "P/S") ratio of 2.3x TOT BIOPHARM International Company Limited (HKG:1875) may be sending very bullish signals at the moment, given that almost half of all the Biotechs companies in Hong Kong have P/S ratios greater than 12.1x and even P/S higher than 32x 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.

Check out our latest analysis for TOT BIOPHARM International

What Does TOT BIOPHARM International's P/S Mean For Shareholders?

With revenue growth that's inferior to most other companies of late, TOT BIOPHARM International 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 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 TOT BIOPHARM International's future stacks up against the industry? In that case, our free report is a great place to start.

How Is TOT BIOPHARM International's Revenue Growth Trending?

TOT BIOPHARM International's 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 150%. This great performance means it was also able to deliver immense revenue growth over the last three years. So we can start by confirming that the company has done a tremendous job of growing revenue over that time.

Looking ahead now, revenue is anticipated to climb by 8.2% during the coming year according to the one analyst following the company. That's shaping up to be materially lower than the 83% growth forecast for the broader industry.

In light of this, it's understandable that TOT BIOPHARM International'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 Key Takeaway

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 expected, our analysis of TOT BIOPHARM International's analyst forecasts confirms that the company's underwhelming revenue outlook is a major contributor to its low P/S. Shareholders' pessimism on the revenue prospects for the company seems to be the main contributor to the depressed P/S. The company will need a change of fortune to justify the P/S rising higher in the future.

And what about other risks? Every company has them, and we've spotted 1 warning sign for TOT BIOPHARM International you should know about.

If strong companies turning a profit tickle your fancy, then you'll want to check out this free list of interesting companies that trade on a low P/E (but have proven they can grow earnings).

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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.