Shanghai Junshi Biosciences Co., Ltd.'s (HKG:1877) Revenues Are Not Doing Enough For Some Investors

Shanghai Junshi Biosciences Co., Ltd.'s (HKG:1877) price-to-sales (or "P/S") ratio of 6.4x might make it look like a buy right now compared to the Biotechs industry in Hong Kong, where around half of the companies have P/S ratios above 8.7x and even P/S above 19x are quite common. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the reduced P/S.

View our latest analysis for Shanghai Junshi Biosciences

How Shanghai Junshi Biosciences Has Been Performing

With revenue growth that's inferior to most other companies of late, Shanghai Junshi Biosciences has been relatively sluggish. The P/S ratio is probably low because investors think this lacklustre revenue performance isn't going to get any better. 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 Shanghai Junshi Biosciences' future stacks up against the industry? In that case, our free report is a great place to start.

How Is Shanghai Junshi Biosciences' Revenue Growth Trending?

In order to justify its P/S ratio, Shanghai Junshi Biosciences would need to produce sluggish growth that's trailing the industry.

Retrospectively, the last year delivered an exceptional 51% gain to the company's top line. However, this wasn't enough as the latest three year period has seen the company endure a nasty 46% drop in revenue in aggregate. Therefore, it's fair to say the revenue growth recently has been undesirable for the company.

Shifting to the future, estimates from the two analysts covering the company suggest revenue should grow by 19% over the next year. With the industry predicted to deliver 28% growth, the company is positioned for a weaker revenue result.

With this information, we can see why Shanghai Junshi Biosciences is trading at a P/S lower than the industry. 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 Shanghai Junshi Biosciences' 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.

We've established that Shanghai Junshi Biosciences maintains its low P/S on the weakness of its forecast growth being lower than the wider industry, as expected. Right now shareholders are accepting the low P/S as they concede future revenue probably won't provide any pleasant surprises. It's hard to see the share price rising strongly in the near future under these circumstances.

Before you settle on your opinion, we've discovered 1 warning sign for Shanghai Junshi Biosciences that you should be aware of.

If you're unsure about the strength of Shanghai Junshi Biosciences' 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.