Insufficient Growth At LabGenomics Co., Ltd. (KOSDAQ:084650) Hampers Share Price

LabGenomics Co., Ltd.'s (KOSDAQ:084650) price-to-sales (or "P/S") ratio of 2.2x might make it look like a strong buy right now compared to the Biotechs industry in Korea, where around half of the companies have P/S ratios above 10.2x and even P/S above 40x are quite common. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's so limited.

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View our latest analysis for LabGenomics

What Does LabGenomics' Recent Performance Look Like?

Revenue has risen firmly for LabGenomics recently, which is pleasing to see. Perhaps the market is expecting this acceptable revenue performance to take a dive, which has kept the P/S suppressed. If you like the company, you'd be hoping this isn't the case so that you could potentially pick up some stock while it's out of favour.

We don't have analyst forecasts, but you can see how recent trends are setting up the company for the future by checking out our free report on LabGenomics' earnings, revenue and cash flow.

What Are Revenue Growth Metrics Telling Us About The Low P/S?

The only time you'd be truly comfortable seeing a P/S as depressed as LabGenomics' is when the company's growth is on track to lag the industry decidedly.

Retrospectively, the last year delivered an exceptional 21% gain to the company's top line. Still, revenue has fallen 58% in total from three years ago, which is quite disappointing. So unfortunately, we have to acknowledge that the company has not done a great job of growing revenues over that time.

Weighing that medium-term revenue trajectory against the broader industry's one-year forecast for expansion of 63% shows it's an unpleasant look.

In light of this, it's understandable that LabGenomics' P/S would sit below the majority of other companies. Nonetheless, there's no guarantee the P/S has reached a floor yet with revenue going in reverse. Even just maintaining these prices could be difficult to achieve as recent revenue trends are already weighing down the shares.

What Does LabGenomics' P/S Mean For Investors?

While the price-to-sales ratio shouldn't be the defining factor in whether you buy a stock or not, it's quite a capable barometer of revenue expectations.

Our examination of LabGenomics confirms that the company's shrinking revenue over the past medium-term is a key factor in its low price-to-sales ratio, given the industry is projected to grow. At this stage investors feel the potential for an improvement in revenue isn't great enough to justify a higher P/S ratio. Given the current circumstances, it seems unlikely that the share price will experience any significant movement in either direction in the near future if recent medium-term revenue trends persist.

Don't forget that there may be other risks. For instance, we've identified 1 warning sign for LabGenomics that you should be aware of.

If these risks are making you reconsider your opinion on LabGenomics, explore our interactive list of high quality stocks to get an idea of what else is out there.

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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.