The Market Doesn't Like What It Sees From RemeGen Co., Ltd.'s (HKG:9995) Revenues Yet As Shares Tumble 30%

RemeGen Co., Ltd. (HKG:9995) shareholders that were waiting for something to happen have been dealt a blow with a 30% share price drop in the last month. The recent drop completes a disastrous twelve months for shareholders, who are sitting on a 64% loss during that time.

After such a large drop in price, RemeGen may be sending very bullish signals at the moment with its price-to-sales (or "P/S") ratio of 3.9x, since almost half of all companies in the Biotechs industry in Hong Kong have P/S ratios greater than 8.5x and even P/S higher than 42x 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.

View our latest analysis for RemeGen

What Does RemeGen's P/S Mean For Shareholders?

RemeGen could be doing better as it's been growing revenue less than most other companies lately. The P/S ratio is probably low because investors think this lacklustre revenue performance isn't going to get any better. If this is the case, then existing shareholders will probably struggle to get excited about the future direction of the share price.

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

Is There Any Revenue Growth Forecasted For RemeGen?

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

If we review the last year of revenue growth, the company posted a terrific increase of 57%. This great performance means it was also able to deliver immense revenue growth over the last three years. Accordingly, shareholders would have been over the moon with those medium-term rates of revenue growth.

Shifting to the future, estimates from the analysts covering the company suggest revenue should grow by 37% per annum over the next three years. With the industry predicted to deliver 55% growth each year, the company is positioned for a weaker revenue result.

With this in consideration, its clear as to why RemeGen's P/S is falling short industry peers. Apparently many shareholders weren't comfortable holding on while the company is potentially eyeing a less prosperous future.

The Bottom Line On RemeGen's P/S

RemeGen's P/S looks about as weak as its stock price lately. 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 RemeGen'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. The company will need a change of fortune to justify the P/S rising higher in the future.

Having said that, be aware RemeGen is showing 1 warning sign in our investment analysis, you should know about.

If you're unsure about the strength of RemeGen'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.