Revenues Not Telling The Story For Next Biomedical Co.,Ltd. (KOSDAQ:389650) After Shares Rise 31%

Next Biomedical Co.,Ltd. (KOSDAQ:389650) shareholders have had their patience rewarded with a 31% share price jump in the last month. Looking back a bit further, it's encouraging to see the stock is up 89% in the last year.

After such a large jump in price, you could be forgiven for thinking Next BiomedicalLtd is a stock to steer clear of with a price-to-sales ratios (or "P/S") of 45.6x, considering almost half the companies in Korea's Medical Equipment industry have P/S ratios below 2x. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the highly elevated P/S.

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See our latest analysis for Next BiomedicalLtd

How Has Next BiomedicalLtd Performed Recently?

With revenue growth that's superior to most other companies of late, Next BiomedicalLtd has been doing relatively well. The P/S is probably high because investors think this strong revenue performance will continue. If not, then existing shareholders might be a little nervous about the viability of the share price.

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

Is There Enough Revenue Growth Forecasted For Next BiomedicalLtd?

In order to justify its P/S ratio, Next BiomedicalLtd would need to produce outstanding growth that's well in excess of the industry.

If we review the last year of revenue growth, the company posted a terrific increase of 71%. This great performance means it was also able to deliver immense revenue growth over the last three years. Therefore, it's fair to say the revenue growth recently has been superb for the company.

Looking ahead now, revenue is anticipated to climb by 62% during the coming year according to the two analysts following the company. With the industry predicted to deliver 71% growth, the company is positioned for a weaker revenue result.

With this in consideration, we believe it doesn't make sense that Next BiomedicalLtd's P/S is outpacing its industry peers. Apparently many investors in the company are way more bullish than analysts indicate and aren't willing to let go of their stock at any price. There's a good chance these shareholders are setting themselves up for future disappointment if the P/S falls to levels more in line with the growth outlook.

The Bottom Line On Next BiomedicalLtd's P/S

Next BiomedicalLtd's P/S has grown nicely over the last month thanks to a handy boost in the share price. Generally, our preference is to limit the use of the price-to-sales ratio to establishing what the market thinks about the overall health of a company.

It comes as a surprise to see Next BiomedicalLtd trade at such a high P/S given the revenue forecasts look less than stellar. When we see a weak revenue outlook, we suspect the share price faces a much greater risk of declining, bringing back down the P/S figures. This places shareholders' investments at significant risk and potential investors in danger of paying an excessive premium.

A lot of potential risks can sit within a company's balance sheet. You can assess many of the main risks through our free balance sheet analysis for Next BiomedicalLtd with six simple checks.

If companies with solid past earnings growth is up your alley, you may wish to see this free collection of other companies with strong earnings growth and low P/E ratios.

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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.