Alphamab Oncology's (HKG:9966) 27% Dip Still Leaving Some Shareholders Feeling Restless Over Its P/SRatio

The Alphamab Oncology (HKG:9966) share price has softened a substantial 27% over the previous 30 days, handing back much of the gains the stock has made lately. Of course, over the longer-term many would still wish they owned shares as the stock's price has soared 190% in the last twelve months.

Although its price has dipped substantially, it's still not a stretch to say that Alphamab Oncology's price-to-sales (or "P/S") ratio of 12.7x right now seems quite "middle-of-the-road" compared to the Biotechs industry in Hong Kong, where the median P/S ratio is around 15x. Although, it's not wise to simply ignore the P/S without explanation as investors may be disregarding a distinct opportunity or a costly mistake.

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View our latest analysis for Alphamab Oncology

What Does Alphamab Oncology's Recent Performance Look Like?

Recent times have been advantageous for Alphamab Oncology as its revenues have been rising faster than most other companies. It might be that many expect the strong revenue performance to wane, which has kept the P/S ratio from rising. If the company manages to stay the course, then investors should be rewarded with a share price that matches its revenue figures.

Want the full picture on analyst estimates for the company? Then our free report on Alphamab Oncology will help you uncover what's on the horizon.

Is There Some Revenue Growth Forecasted For Alphamab Oncology?

Alphamab Oncology's P/S ratio would be typical for a company that's only expected to deliver moderate growth, and importantly, perform in line with the industry.

Retrospectively, the last year delivered an exceptional 207% gain to the company's top line. Pleasingly, revenue has also lifted 294% in aggregate from three years ago, thanks to the last 12 months of growth. 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 19% per annum as estimated by the one analyst watching the company. Meanwhile, the rest of the industry is forecast to expand by 92% per annum, which is noticeably more attractive.

With this in mind, we find it intriguing that Alphamab Oncology's P/S is closely matching its industry peers. It seems most investors are ignoring the fairly limited growth expectations and are willing to pay up for exposure to the stock. Maintaining these prices will be difficult to achieve as this level of revenue growth is likely to weigh down the shares eventually.

The Final Word

With its share price dropping off a cliff, the P/S for Alphamab Oncology looks to be in line with the rest of the Biotechs industry. 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.

Given that Alphamab Oncology's revenue growth projections are relatively subdued in comparison to the wider industry, it comes as a surprise to see it trading at its current P/S ratio. When we see companies with a relatively weaker revenue outlook compared to the industry, we suspect the share price is at risk of declining, sending the moderate P/S lower. A positive change is needed in order to justify the current price-to-sales ratio.

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

If strong companies turning a profit tickle your fancy, then you'll want to check out this free list of interesting companies that trade on a low P/E (but have proven they can grow earnings).

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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.