Insufficient Growth At Akeso, Inc. (HKG:9926) Hampers Share Price

Akeso, Inc.'s (HKG:9926) price-to-sales (or "P/S") ratio of 8x might make it look like a buy right now compared to the Biotechs industry in Hong Kong, where around half of the companies have P/S ratios above 12.1x and even P/S above 32x are quite common. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's limited.

View our latest analysis for Akeso

How Akeso Has Been Performing

With revenue growth that's superior to most other companies of late, Akeso has been doing relatively well. Perhaps the market is expecting future revenue performance to dive, which has kept the P/S suppressed. 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.

If you'd like to see what analysts are forecasting going forward, you should check out our free report on Akeso.

Is There Any Revenue Growth Forecasted For Akeso?

In order to justify its P/S ratio, Akeso would need to produce sluggish growth that's trailing the industry.

Retrospectively, the last year delivered an explosive gain to the company's top line. The amazing performance means it was also able to deliver huge revenue growth over the last three years. Accordingly, shareholders would have been over the moon with those medium-term rates of revenue growth.

Turning to the outlook, the next three years should generate growth of 10% each year as estimated by the analysts watching the company. Meanwhile, the rest of the industry is forecast to expand by 69% each year, which is noticeably more attractive.

In light of this, it's understandable that Akeso's P/S sits below the majority of other companies. It seems most investors are expecting to see limited future growth and are only willing to pay a reduced amount for the stock.

What Does Akeso's P/S Mean For Investors?

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 Akeso's analyst forecasts revealed that its inferior revenue outlook is contributing to its low P/S. Shareholders' pessimism on the revenue prospects for the company seems to be the main contributor to the depressed P/S. It's hard to see the share price rising strongly in the near future under these circumstances.

Don't forget that there may be other risks. For instance, we've identified 3 warning signs for Akeso (2 shouldn't be ignored) you should be aware of.

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

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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.