Little Excitement Around China Regenerative Medicine International Limited's (HKG:8158) Revenues As Shares Take 32% Pounding

The China Regenerative Medicine International Limited (HKG:8158) share price has fared very poorly over the last month, falling by a substantial 32%. For any long-term shareholders, the last month ends a year to forget by locking in a 77% share price decline.

In spite of the heavy fall in price, China Regenerative Medicine International may still be sending very bullish signals at the moment with its price-to-sales (or "P/S") ratio of 0.5x, since almost half of all companies in the Biotechs industry in Hong Kong have P/S ratios greater than 10.3x and even P/S higher than 28x are not unusual. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the highly reduced P/S.

See our latest analysis for China Regenerative Medicine International

What Does China Regenerative Medicine International's P/S Mean For Shareholders?

For example, consider that China Regenerative Medicine International's financial performance has been poor lately as its revenue has been in decline. Perhaps the market believes the recent revenue performance isn't good enough to keep up the industry, causing the P/S ratio to suffer. However, if this doesn't eventuate then existing shareholders may be feeling optimistic about the future direction of the share price.

We don't have analyst forecasts, but you can see how recent trends are setting up the company for the future by checking out our free report on China Regenerative Medicine International's earnings, revenue and cash flow.

What Are Revenue Growth Metrics Telling Us About The Low P/S?

China Regenerative Medicine International's P/S ratio would be typical for a company that's expected to deliver very poor growth or even falling revenue, and importantly, perform much worse than the industry.

Retrospectively, the last year delivered a frustrating 27% decrease to the company's top line. Still, the latest three year period has seen an excellent 64% 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.

Comparing that to the industry, which is predicted to deliver 78% growth in the next 12 months, the company's momentum is weaker, based on recent medium-term annualised revenue results.

With this information, we can see why China Regenerative Medicine International is trading at a P/S lower than the industry. Apparently many shareholders weren't comfortable holding on to something they believe will continue to trail the wider industry.

What We Can Learn From China Regenerative Medicine International's P/S?

Shares in China Regenerative Medicine International have plummeted and its P/S has followed suit. 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.

As we suspected, our examination of China Regenerative Medicine International 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.

Plus, you should also learn about these 5 warning signs we've spotted with China Regenerative Medicine International (including 2 which are potentially serious).

If you're unsure about the strength of China Regenerative Medicine International's 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.