Biocytogen Pharmaceuticals (Beijing) Co., Ltd.'s (HKG:2315) Price Is Right But Growth Is Lacking

With a price-to-sales (or "P/S") ratio of 4.1x Biocytogen Pharmaceuticals (Beijing) Co., Ltd. (HKG:2315) 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 11.4x and even P/S higher than 23x are not unusual. However, the P/S might be quite low for a reason and it requires further investigation to determine if it's justified.

See our latest analysis for Biocytogen Pharmaceuticals (Beijing)

How Biocytogen Pharmaceuticals (Beijing) Has Been Performing

Recent times haven't been great for Biocytogen Pharmaceuticals (Beijing) as its revenue has been rising slower than most other companies. Perhaps the market is expecting the current trend of poor revenue growth to continue, which has kept the P/S suppressed. If this is the case, then existing shareholders will probably struggle to get excited about the future direction of the share price.

If you'd like to see what analysts are forecasting going forward, you should check out our free report on Biocytogen Pharmaceuticals (Beijing).

Do Revenue Forecasts Match The Low P/S Ratio?

In order to justify its P/S ratio, Biocytogen Pharmaceuticals (Beijing) would need to produce anemic growth that's substantially trailing the industry.

If we review the last year of revenue growth, the company posted a terrific increase of 34%. The strong recent performance means it was also able to grow revenue by 183% in total over the last three years. Therefore, it's fair to say the revenue growth recently has been superb for the company.

Turning to the outlook, the next three years should generate growth of 25% per year as estimated by the one analyst watching the company. Meanwhile, the rest of the industry is forecast to expand by 137% each year, which is noticeably more attractive.

With this information, we can see why Biocytogen Pharmaceuticals (Beijing) is trading at a P/S lower than the industry. Apparently many shareholders weren't comfortable holding on while the company is potentially eyeing a less prosperous future.

The Bottom Line On Biocytogen Pharmaceuticals (Beijing)'s P/S

Using the price-to-sales ratio alone to determine if you should sell your stock isn't sensible, however it can be a practical guide to the company's future prospects.

We've established that Biocytogen Pharmaceuticals (Beijing) maintains its low P/S on the weakness of its forecast growth being lower than the wider industry, as expected. 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.

Having said that, be aware Biocytogen Pharmaceuticals (Beijing) is showing 1 warning sign in our investment analysis, you should know about.

If these risks are making you reconsider your opinion on Biocytogen Pharmaceuticals (Beijing), explore our interactive list of high quality stocks to get an idea of what else is out there.

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.