Market Might Still Lack Some Conviction On JW (Cayman) Therapeutics Co. Ltd (HKG:2126) Even After 37% Share Price Boost

The JW (Cayman) Therapeutics Co. Ltd (HKG:2126) share price has done very well over the last month, posting an excellent gain of 37%. The bad news is that even after the stocks recovery in the last 30 days, shareholders are still underwater by about 2.2% over the last year.

Even after such a large jump in price, JW (Cayman) Therapeutics may still look like a strong buying opportunity at present with its price-to-sales (or "P/S") ratio of 3.8x, considering almost half of all companies in the Biotechs industry in Hong Kong have P/S ratios greater than 9.8x and even P/S higher than 50x aren't out of the ordinary. However, the P/S might be quite low for a reason and it requires further investigation to determine if it's justified.

View our latest analysis for JW (Cayman) Therapeutics

How Has JW (Cayman) Therapeutics Performed Recently?

With revenue growth that's inferior to most other companies of late, JW (Cayman) Therapeutics 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 JW (Cayman) Therapeutics' 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 JW (Cayman) Therapeutics?

The only time you'd be truly comfortable seeing a P/S as depressed as JW (Cayman) Therapeutics' is when the company's growth is on track to lag the industry decidedly.

If we review the last year of revenue growth, the company posted a worthy increase of 3.3%. Still, revenue has barely risen at all in aggregate from three years ago, which is not ideal. So it appears to us that the company has had a mixed result in terms of growing revenue over that time.

Shifting to the future, estimates from the only analyst covering the company suggest revenue should grow by 58% per year over the next three years. Meanwhile, the rest of the industry is forecast to expand by 55% per year, which is not materially different.

With this information, we find it odd that JW (Cayman) Therapeutics is trading at a P/S lower than the industry. Apparently some shareholders are doubtful of the forecasts and have been accepting lower selling prices.

What Does JW (Cayman) Therapeutics' P/S Mean For Investors?

Even after such a strong price move, JW (Cayman) Therapeutics' P/S still trails the rest of the industry. 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 seen that JW (Cayman) Therapeutics currently trades on a lower than expected P/S since its forecast growth is in line with the wider industry. When we see middle-of-the-road revenue growth like this, we assume it must be the potential risks that are what is placing pressure on the P/S ratio. However, if you agree with the analysts' forecasts, you may be able to pick up the stock at an attractive price.

You need to take note of risks, for example - JW (Cayman) Therapeutics has 3 warning signs (and 1 which is a bit unpleasant) we think you should know about.

It's important to make sure you look for a great company, not just the first idea you come across. So if growing profitability aligns with your idea of a great company, take a peek at this free list of interesting companies with strong recent earnings growth (and a low P/E).

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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.