Biosino Bio-Technology and Science Incorporation (HKG:8247) Held Back By Insufficient Growth Even After Shares Climb 46%

Biosino Bio-Technology and Science Incorporation (HKG:8247) shareholders are no doubt pleased to see that the share price has bounced 46% in the last month, although it is still struggling to make up recently lost ground. Not all shareholders will be feeling jubilant, since the share price is still down a very disappointing 31% in the last twelve months.

Even after such a large jump in price, Biosino Bio-Technology and Science Incorporation may still be sending very bullish signals at the moment with its price-to-sales (or "P/S") ratio of 0.4x, since almost half of all companies in the Biotechs industry in Hong Kong have P/S ratios greater than 10.6x and even P/S higher than 22x 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 Biosino Bio-Technology and Science Incorporation

What Does Biosino Bio-Technology and Science Incorporation's Recent Performance Look Like?

As an illustration, revenue has deteriorated at Biosino Bio-Technology and Science Incorporation over the last year, which is not ideal at all. One possibility is that the P/S is low because investors think the company won't do enough to avoid underperforming the broader industry in the near future. If you like the company, you'd be hoping this isn't the case so that you could potentially pick up some stock while it's out of favour.

Want the full picture on earnings, revenue and cash flow for the company? Then our free report on Biosino Bio-Technology and Science Incorporation will help you shine a light on its historical performance.

How Is Biosino Bio-Technology and Science Incorporation's Revenue Growth Trending?

There's an inherent assumption that a company should far underperform the industry for P/S ratios like Biosino Bio-Technology and Science Incorporation's to be considered reasonable.

Retrospectively, the last year delivered a frustrating 23% decrease to the company's top line. The last three years don't look nice either as the company has shrunk revenue by 11% in aggregate. Accordingly, shareholders would have felt downbeat about the medium-term rates of revenue growth.

Comparing that to the industry, which is predicted to deliver 42% growth in the next 12 months, the company's downward momentum based on recent medium-term revenue results is a sobering picture.

With this information, we are not surprised that Biosino Bio-Technology and Science Incorporation is trading at a P/S lower than the industry. However, we think shrinking revenues are unlikely to lead to a stable P/S over the longer term, which could set up shareholders for future disappointment. Even just maintaining these prices could be difficult to achieve as recent revenue trends are already weighing down the shares.

What Does Biosino Bio-Technology and Science Incorporation's P/S Mean For Investors?

Biosino Bio-Technology and Science Incorporation's recent share price jump still sees fails to bring its P/S alongside the industry median. While the price-to-sales ratio shouldn't be the defining factor in whether you buy a stock or not, it's quite a capable barometer of revenue expectations.

Our examination of Biosino Bio-Technology and Science Incorporation confirms that the company's shrinking revenue over the past medium-term is a key factor in its low price-to-sales ratio, given the industry is projected to grow. At this stage investors feel the potential for an improvement in revenue isn't great enough to justify a higher P/S ratio. Unless the recent medium-term conditions improve, they will continue to form a barrier for the share price around these levels.

Before you take the next step, you should know about the 2 warning signs for Biosino Bio-Technology and Science Incorporation (1 is concerning!) that we have uncovered.

Of course, profitable companies with a history of great earnings growth are generally safer bets. So you may wish to see this free collection of other companies that have reasonable P/E ratios and have grown earnings strongly.

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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.