Revenues Working Against Austar Lifesciences Limited's (HKG:6118) Share Price Following 30% Dive

Unfortunately for some shareholders, the Austar Lifesciences Limited (HKG:6118) share price has dived 30% in the last thirty days, prolonging recent pain. The recent drop completes a disastrous twelve months for shareholders, who are sitting on a 51% loss during that time.

After such a large drop in price, given close to half the companies in Hong Kong's Life Sciences industry have price-to-sales ratios (or "P/S") above 3x, you may consider Austar Lifesciences as a highly attractive investment with its 0.3x P/S ratio. 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 Austar Lifesciences

How Austar Lifesciences Has Been Performing

For instance, Austar Lifesciences' receding revenue in recent times would have to be some food for thought. Perhaps the market believes the recent revenue performance isn't good enough to keep up the industry, causing the P/S ratio to suffer. Those who are bullish on Austar Lifesciences will be hoping that this isn't the case so that they can pick up the stock at a lower valuation.

Want the full picture on earnings, revenue and cash flow for the company? Then our free report on Austar Lifesciences will help you shine a light on its historical performance.

How Is Austar Lifesciences' Revenue Growth Trending?

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

Retrospectively, the last year delivered a frustrating 21% decrease to the company's top line. Still, the latest three year period has seen an excellent 36% overall rise in revenue, in spite of its unsatisfying short-term performance. Accordingly, while they would have preferred to keep the run going, shareholders would definitely welcome the medium-term rates of revenue growth.

This is in contrast to the rest of the industry, which is expected to grow by 18% over the next year, materially higher than the company's recent medium-term annualised growth rates.

With this in consideration, it's easy to understand why Austar Lifesciences' P/S falls short of the mark set by its industry peers. Apparently many shareholders weren't comfortable holding on to something they believe will continue to trail the wider industry.

What We Can Learn From Austar Lifesciences' P/S?

Austar Lifesciences' P/S looks about as weak as its stock price lately. It's argued the price-to-sales ratio is an inferior measure of value within certain industries, but it can be a powerful business sentiment indicator.

As we suspected, our examination of Austar Lifesciences revealed its three-year revenue trends are contributing to its low P/S, given they look worse than current industry expectations. Right now shareholders are accepting the low P/S as they concede future revenue probably won't provide any pleasant surprises. Unless the recent medium-term conditions improve, they will continue to form a barrier for the share price around these levels.

There are also other vital risk factors to consider before investing and we've discovered 2 warning signs for Austar Lifesciences that you should be aware of.

If you're unsure about the strength of Austar Lifesciences' 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.