RemeGen (SEHK:9995): Assessing Valuation After 25% Revenue Growth and a 2% Share Price Gain

RemeGen (SEHK:9995) shares climbed 2% today after the biopharma company posted annual revenue growth of 25%. Investors are watching how this momentum might translate into future profit and long-term performance.

See our latest analysis for RemeGen.

After a blistering rally in recent months, RemeGen’s share price has soared over 570% year-to-date, even with some sharp swings such as last week’s pullback. The long-term trend also stands out with a remarkable 1-year total shareholder return of 508%, demonstrating strong momentum as investors continue to reprice the company’s growth prospects.

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But with shares trading well above analyst price targets after such meteoric gains, the key question now is whether RemeGen offers real value or if the market has already priced in all its future growth potential.

Price-to-Sales of 22.4x: Is it justified?

RemeGen trades at a lofty price-to-sales ratio of 22.4x, outpacing both the Hong Kong Biotechs industry and the wider peer group. The last close price reflects exceptional market optimism, but investors need to assess whether such premiums can persist.

The price-to-sales ratio is a popular benchmark for unprofitable biotechs because it allows direct comparison of growth-stage companies without focusing on elusive earnings. For RemeGen, this figure suggests the market is paying an outsized premium for each unit of revenue, betting heavily on future growth prospects instead of current profitability.

Compared to an industry average of 16.3x and a peer average of just 10.3x, RemeGen's valuation stands well above its rivals. In addition, the fair price-to-sales ratio is estimated at 15.2x, indicating that RemeGen's valuation is high even when considering sector growth norms. If the market were to recalibrate toward fairer levels, there could be a significant shift in sentiment.

Explore the SWS fair ratio for RemeGen

Result: Price-to-Sales of 22.4x (OVERVALUED)

However, RemeGen's high valuation could face pressure if revenue growth slows or if analyst expectations are missed in upcoming quarters.

Find out about the key risks to this RemeGen narrative.

Another View: What Does Our DCF Model Say?

While RemeGen’s price-to-sales ratio paints a picture of overvaluation, the SWS DCF model suggests a different outlook. According to our model, RemeGen is trading around 14.8% below its estimated fair value. This could potentially offer investors a margin of safety even after the steep rally. Could this indicate overlooked upside, or does the premium already reflect lofty expectations?

Look into how the SWS DCF model arrives at its fair value.

Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out RemeGen for example). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes, or use our stock screener to discover undervalued stocks based on their cash flows. If you save a screener we even alert you when new companies match - so you never miss a potential opportunity.

Build Your Own RemeGen Narrative

If you have your own perspective or want to dig deeper into the numbers, you can build a custom narrative in just a few minutes. Do it your way.

A great starting point for your RemeGen research is our analysis highlighting 2 key rewards and 2 important warning signs that could impact your investment decision.

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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.

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