TOT BIOPHARM International Company Limited's (HKG:1875) Low P/S No Reason For Excitement

With a price-to-sales (or "P/S") ratio of 1.2x 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 9.9x and even P/S higher than 41x 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.

View 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 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.

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.

Is There Any Revenue Growth Forecasted For TOT BIOPHARM International?

In order to justify its P/S ratio, TOT BIOPHARM International would need to produce anemic growth that's substantially trailing the industry.

Retrospectively, the last year delivered an exceptional 65% gain to the company's top line. The latest three year period has also seen an incredible overall rise in revenue, aided by its incredible short-term performance. 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 27% during the coming year according to the one analyst following the company. That's shaping up to be materially lower than the 143% 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.

What We Can Learn From TOT BIOPHARM International's P/S?

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. At this stage investors feel the potential for an improvement in revenue isn't great enough to justify a higher P/S ratio. 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 1 warning sign for TOT BIOPHARM International that you should be aware of.

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

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.