Chabiotech Co.,Ltd. (KOSDAQ:085660) Looks Inexpensive After Falling 28% But Perhaps Not Attractive Enough

Unfortunately for some shareholders, the Chabiotech Co.,Ltd. (KOSDAQ:085660) share price has dived 28% in the last thirty days, prolonging recent pain. The drop over the last 30 days has capped off a tough year for shareholders, with the share price down 45% in that time.

Following the heavy fall in price, given about half the companies operating in Korea's Healthcare industry have price-to-sales ratios (or "P/S") above 1.3x, you may consider ChabiotechLtd as an attractive investment with its 0.6x P/S ratio. However, the P/S might be low for a reason and it requires further investigation to determine if it's justified.

See our latest analysis for ChabiotechLtd

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

Revenue has risen at a steady rate over the last year for ChabiotechLtd, which is generally not a bad outcome. It might be that many expect the respectable revenue performance to degrade, which has repressed the P/S. If that doesn't eventuate, then existing shareholders may have reason to be optimistic about the future direction of the share price.

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

Is There Any Revenue Growth Forecasted For ChabiotechLtd?

ChabiotechLtd's P/S ratio would be typical for a company that's only expected to deliver limited growth, and importantly, perform worse than the industry.

Retrospectively, the last year delivered a decent 7.1% gain to the company's revenues. This was backed up an excellent period prior to see revenue up by 43% in total over the last three years. Accordingly, shareholders would have definitely welcomed those medium-term rates of revenue growth.

Comparing the recent medium-term revenue trends against the industry's one-year growth forecast of 17% shows it's noticeably less attractive.

In light of this, it's understandable that ChabiotechLtd's P/S sits below the majority of other companies. Apparently many shareholders weren't comfortable holding on to something they believe will continue to trail the wider industry.

What We Can Learn From ChabiotechLtd's P/S?

ChabiotechLtd's recently weak share price has pulled its P/S back below other Healthcare companies. We'd say the price-to-sales ratio's power isn't primarily as a valuation instrument but rather to gauge current investor sentiment and future expectations.

Our examination of ChabiotechLtd confirms that the company's revenue trends over the past three-year years are a key factor in its low price-to-sales ratio, as we suspected, given they fall short of current industry expectations. At this stage investors feel the potential for an improvement in revenue isn't great enough to justify a higher P/S ratio. If recent medium-term revenue trends continue, it's hard to see the share price experience a reversal of fortunes anytime soon.

You need to take note of risks, for example - ChabiotechLtd has 2 warning signs (and 1 which is significant) we think you should know about.

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.